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Stability eludes sterling as PM May heads back to the EU for further talks after scrapping Brexit vote.

Previous Day's Market Highlights

Brexit stole the headlines once again on Monday, with Prime Minister May announcing plans to delay the meaningful House of Commons vote on the Brexit withdrawal legislation on fears that the government would suffer a landslide defeat. PM May now plans to head back to the EU to seek “assurances” and “clarification” around the contentious Irish backstop arrangement, however no date has yet been set for a new vote in Parliament. Heightened political uncertainty and an increasing probability of a no deal Brexit weighed significantly on sterling, sending the pound to its lowest level in twenty months against the dollar at 1.2508 while also hitting a three-month low against the euro at 1.1004.
Having begun falling when rumours of the vote being postponed broke, sterling’s dive was exacerbated by the House of Commons Speaker John Bercow stating that the government might have to put forward a motion to delay the Brexit legislation, potentially shrouding the postponement in doubt and throwing further uncertainty into the mix.
With Brexit taking the headlines, data releases took a back seat. Despite this, UK GDP remained resilient, showing growth of 0.1% on a month-on-month basis in contrast with a 0.9% month-on-month decline in UK manufacturing production.
Away from the FX markets, European equity markets suffered a tough start to the week with all major bourses down more than 1%. US indices bucked this trend, recording small gains at the close after a volatile trading session.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1067 1.1550 1.1004 4.73%
GBP/USD 1.2581 1.3071 1.2506 4.32%
EUR/USD 1.1361 1.1472 1.1263 1.82%
GBP/AUD 1.7488 1.8065 1.7208 4.74%
GBP/NZD 1.8327 1.9283 1.8183 5.70%
GBP/CAD 1.6876 1.7285 1.6722 3.26%

Today's Market Highlights

Once again, data is likely to take a back seat with Brexit headlines set to come to the fore once again as Theresa May begins a tour of European capitals for discussions after scrapping yesterday’s vote. Market participants will be paying close attention to any further headlines surrounding a possible clarification of the Irish backstop arrangement as well as keeping a keen eye on parliamentary arithmetic to gauge the chances of a re-negotiated deal being passed in Parliament.
Away from Brexit, the economic calendar is relatively busy with the main highlight set to be the UK labour market report. While the direction of the pound will be driven by political developments, investors will still be looking for a strong release to gauge the UK’s economic health. Unemployment and average earnings are both forecast to remain flat at 4.1% and 3.0% respectively while the claimant count change is expected to decrease slightly to 13.2k.
Elsewhere, US PPI for November will be released which is forecast to remain flat at 2.6% on a year-on-year basis. Other highlights include the latest German ZEW economic sentiment index as well as consumer sentiment figures from Australia late in the evening. No central bank speakers are scheduled for today, ahead of meetings of both the Swiss National Bank and European Central Bank on Thursday.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Average Earnings Index (3m/y) 3.0% 3.0%
9:30am GBP Unemployment Rate 4.1% 4.1%
9:30am GBP Claimant Count Change 13.2k 20.2k
1:30pm USD PPI (y/y) 2.5% 2.9%