Previous Day's Market Highlights
For the first time since the referendum 3 years ago, MPs voted in favour of a Brexit deal on Tuesday, approving Prime Minister Johnson's renegotiated Withdrawal Agreement by 329 votes to 299, a healthy majority of 30 MPs. The vote, the second reading of the Withdrawal Agreement Bill, which enshrines the Brexit deal in law, passed with the help of a number of 'rebel' Labour MPs, who have likely been reassured by the government's commitments to worker's rights and Parliament having a say in the post-Brexit trade deal process. Nonetheless, while the 2nd reading vote provided the government with momentum, the wind was soon knocked out of their sails after MPs rejected the condensed timetable for passing the legislation, voting against the so-called programme motion which aimed to ratify the Brexit deal ahead of the 31st October. With the planned timetable for the vote rejected, the legislation has been 'paused', while the government consider their options.
That would, however, be far too simple an end to a day in British politics. Shortly after the vote results were announced, EU Council President Tusk announced that he would be proposing that EU27 leaders grant the UK the requested 3-month Article 50 extension. Such an extension will likely be flexible, meaning the UK can leave as soon as a deal has been ratified. However, while this may be the case, Number 10 were last night briefing that the government will now pivot towards a general election campaign, based around the theme of 'get Brexit with Boris'. While such an election would need to be approved by a two-thirds majority of MPs, opposition leaders have previously indicated that they would vote in favour of a plebiscite if an extension had been secured. A general election, if approved, will likely take place in early-December.
For the pound, the aforementioned developments resulted in some choppy trading conditions. Sterling had held within a tight range for the majority of the day, before quickly gaining 50 pips, rallying to $1.30 and €1.1650, after the 2nd reading vote was successful. The pound's gains were short-lived however, with the currency losing just shy of 1% after the programme motion was defeated. At the close, sterling was 0.5% lower against the dollar, and 0.3% lower against the euro over the course of the day. Looking ahead, sterling may come under pressure as uncertainty mounts ahead and during a potential election campaign, possibly bringing the pound back towards the mid $1.20s.
Elsewhere, markets struck more of a risk-averse tone, with jitters over the Brexit process and US-China trade relations continuing. As a result, the dollar ticked up by 0.2% against a basket of peers, the first gain in 6 days, while the yen also strengthened. In contrast, both antipodeans were a touch softer.
On the data front, signs of softness are beginning to emerge in the Canadian consumer, as data showed retail sales unexpectedly declined in August, the 3rd fall in the last 4 months. Headline sales fell 0.1%, while sales excluding automobiles decreased by 0.2%, potentially raising the chances of additional policy accommodation being provided by the Bank of Canada. The loonie largely shrugged off the release, closing unchanged, with higher oil prices helping to provide support.
Away from FX, European equity markets were quiet, with investors likely nervous ahead of the crunch Brexit votes; the pan-continental Stoxx 600 closed 0.1% higher. US markets also lost ground, with the benchmark S&P 500 shedding 0.35%. Finally, oil prices firmed after reports that OPEC are to consider deeper supply cuts at its December meeting. Global benchmark Brent settled 1.25% higher, while US WTI crude added 1.6%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
The day ahead is once again likely to be dominated by events relating to the UK's departure from the EU, with the clock still ticking down to the 31st October departure date. Focus today will likely be on the government's planned next steps; namely, whether an early general election will be called. Calling an early poll will require the Prime Minister to table a Parliamentary motion before the end of business today, which would then be voted on at tomorrow's sitting. Expect several questions on the subject of an early poll to be raised at Prime Minister's Questions this lunchtime. Meanwhile, attention will also be on any comments from EU leaders over granting an extension, with French President Macron making clear his displeasure over a further delay to the Brexit process. For the pound, the risks appear biased to the downside, with the calling of an early election and mounting uncertainties set to exert pressure.
Meanwhile, today's economic calendar contains little in the way of major releases. No notable figures are due from either the UK or US, while this afternoon's Canadian wholesale sales report and eurozone consumer confidence figures will likely fail to ignite significant volatility.
The central bank speaking calendar is also barren, with both the Fed and ECB in their pre-meeting blackout periods. Speaking of the ECB, tomorrow will be President Draghi's final meeting as President, though no policy changes are expected.
Today's Economic Calendar
|13.30pm||CAD||Wholesale Sales (MoM - Aug)||0.3%||1.7%|
|15.00pm||EUR||Prelim. Consumer Confidence (Oct)||-6.7||-6.5|