Previous Day's Market Highlights
Sterling held steady on Monday as the Brexit merry-go-round kept spinning, as a hectic day in Westminster did little to dampen market expectations of a Brexit deal being passed. Investors had been expecting a fourth - or maybe fifth, I've lost count - 'meaningful vote' to take place on Monday; however Commons Speaker Bercow ruled that such a vote could not take place, stating that the government could not ask MPs to vote for a second time on a motion of similar substance to Saturday's. The Speaker ruled that it would be 'repetitive and disorderly' for a meaningful vote to take place today, though did confirm that it would be legitimate for the government to introduce the Withdrawal Agreement Bill - legislation that enshrines the UK-EU Brexit deal in UK law. The Bill outlines the terms of the UK's withdrawal from the EU, while also removing the need for another 'meaningful vote' to be held and enshrining workers' rights protections in law; the latter point being key for Labour MPs considering backing the deal. The government plan to rush this legislation through the Commons in order to meet the 31st October deadline (more below).
Meanwhile, MEPs announced their decision to delay approval of the EU Parliament's approval of the Brexit deal until the House of Commons has completed the ratification process. We now have 9 days until the UK legally leaves the EU, with extremely tight timeframes to pass hefty legislation on both sides of the Channel. This has somewhat increased the risk of an 'accidental' no-deal departure, should neither side countenance a technical extension to complete the ratification process. Nonetheless, the pound continues to cling on to hopes of the deal being approved, striking a firm tone as the trading week began. Sterling quickly regained its losses in early Asian trading, settling 0.4% higher against both the dollar and euro. The pound did take a brief look above the $1.30 handle, a 5-and-a-half month high, though was unable to hold its ground for long. Almost all of the pound's gains came in Asian trade, with sterling rangebound for much of the European and American sessions.
Elsewhere, there were no notable releases across the G10 FX landscape, resulting in quiet trading conditions. Risk sentiment remained relatively healthy, aided by comments from US Commerce Secretary Wilbur Ross that December's planned tariff imposition could be cancelled if phase one US-China trade talks go well. The improved risk appetite saw the dollar settle unchanged, while the Aussie and Kiwi dollars struck a firmer tone, while the Japanese yen and Swiss franc were both 0.2% softer. The euro, however, begun the week on the back foot, dipping 0.25% ahead of Thursday's key flash October PMI surveys.
Overnights, results of the 43rd Canadian Federal Election provided little in the way of surprises, as Prime Minister Justin Trudeau won a 2nd term in office. Trudeau, however, will lead a minority government, supported by minor parties, having failed to win an outright majority in the neck and neck race. The loonie showed little reaction to the election results, trading flat overnight.
Away from FX, equity markets on both sides of the Atlantic gained ground on the aforementioned trade optimism. In Europe, the pan-continental Stoxx 600 closed 0.7% higher, while the US S&P 500 gained 0.69%. Oil prices, however, failed to gain, as demand concerns continued to pressure prices. Global benchmark Brent settled 0.8% lower, while US WTI crude lost just shy of 1%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Brexit developments will remain in focus today, as Parliamentary proceedings on the legislation to implement the government's new Brexit deal begin. After the Withdrawal Agreement Bill was introduced yesterday, MPs will today vote on the second reading of the legislation - the first step towards the Bill becoming the law. While the numbers are likely to be tight, the government should have enough votes to pass the vote with a narrow majority. It should, however, be noted that some MPs may vote in favour of the second reading purely with the aim of making amendments to the legislation, rather than to signal agreement with the new Brexit deal. Therefore, the more important vote will be on the programme motion, detailed below. However, should MPs reject the second reading of the Bill, this would mark the end of the road for the deal, with the government being unable to reintroduce the Bill in this Parliamentary session.
Assuming that the second reading passes, MPs will then be asked to approve the programme motion - the motion setting out the timetable for MPs' consideration of the Bill. The legislative timetable for the Bill will be extremely tight, with the government aiming to complete the Commons stages of the legislation by Thursday evening in order to stick to the deadline of leaving on 31st October. The vote on the programme motion will be important, as, if it fails, ratification of a deal by 31st October appears to be an extremely unlikely prospect. Assuming the programme motion passes, MPs will then consider the Bill in Committee, where amendments to the legislation are likely to be proposed. These amendments, likely to centre around either a customs union with the EU, or a 2nd Brexit referendum, will then be put to a vote, with the government planning to pull the legislation if the Bill steps "too far away from" the deal agreed with the EU.
The playbook for the pound remains the same as ever; moves towards ratification of the Brexit deal will result in sterling upside, while steps away from approval of the deal will see sterling come under pressure.
Elsewhere, a couple of notable economic reports are due from across the pond. From the US, this afternoon sees the release of September's existing home sales data, in addition to October's manufacturing activity data from the Richmond Fed. The direction of the dollar, however, will largely depend on any developments in US-China trade relations. Meanwhile, from Canada, August's retail sales data will be eyed, along with the BoC's quarterly business outlook survey, a useful indicator of the monetary policy outlook.
Finally, central bank speakers are relatively thin on the ground, with both the Fed and ECB in their pre-meeting blackout periods. Today's only scheduled remarks come this evening from RBA Assistant Governor Kent.
Today's Economic Calendar
|13.30pm||CAD||Retail Sales (MoM - Aug)||0.4%||0.4%|
|13.30pm||CAD||Retail Sales ex Autos (MoM - Aug)||0.1%||-0.1%|
|15.00pm||USD||Existing Home Sales (MoM - Sep)||5.45mln||5.49mln|
|15.00pm||USD||Richmond Fed Manufacturing Index (Oct)||-14||-9|
|15.00pm||CAD||BoC Business Outlook Survey|
|Tentative (Evening)||GBP||Parliamentary Vote on Withdrawal Agreement Bill (2nd Reading)|