Brexit Roadblock

Sterling slides as political headwinds intensify after Speaker Bercow rules out a third meaningful vote and a deal with the DUP looks unlikely.

Previous Day's Market Highlights

Sterling struggled on Monday as intensifying political headwinds reduced the chances of a Brexit deal being approved by Parliament this week. Throughout the day, rumours swirled that a deal between the Government and the DUP was “almost 100% certain” not to happen this week, dampening any hopes that the market had of a deal being ratified ahead of Thursday’s EU summit. Adding to the pound’s woes was a decision by the Speaker of the House of Commons to effectively rule out a 3rd meaningful vote on the Withdrawal Agreement, unless there have been substantial changes. It is now increasingly likely that the Prime Minister will request a long, 6-9 month, extension to Article 50 to enable such changes to be made and for Parliament to find a consensus on the way forward. At the end of the London trading day, the pound had lost 0.5% against both the dollar and the euro, finding support at $1.32 and €1.1650 respectively. 
 
Elsewhere, a lack of major economic data releases kept most major currencies confined to their recent trading ranges. The euro edged up agains the dollar by around 0.1%, aided by an above-forecast trade surplus, though the single currency struggled above $1.1350. Meanwhile, the dollar traded broadly flat over the day, with focus shifting to Wednesday’s FOMC meeting. Markets ignored the as-forecast release of NAHB housing data. Antipodeans gained, with both the Aussie and Kiwi adding 0.2%, in line with an improvement in risk appetite and upward moves in equity markets. Overnight, minutes from the Reserve Bank of Australia’s latest meeting provided little in the way of new information, emphasising the RBA’s cautious tone and the “significant uncertainties” on the economic outlook.
 
In other markets, European equities performed well, with London’s FTSE 100 gaining 0.9% - its biggest daily gain since 5th February. The pan-continental Stoxx 600 closed up by 0.2%. In the US, markets also closed in the green, with the S&P 500 adding 0.35%. Finally, oil prices continued to firm, underpinned by continued compliance with OPEC-led supply cuts. Benchmark Brent added 0.6%, while US WTI crude gained more than 1%, reaching a fresh year-to-date high. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1695 1.1803 1.1456 2.94%
GBP/USD 1.3272 1.3381 1.2939 3.30%
EUR/USD 1.1344 1.1419 1.1176 2.13%
GBP/AUD 1.8710 1.8851 1.8096 4.01%
GBP/NZD 1.9357 1.9542 1.8946 3.05%
GBP/CAD 1.7697 1.7795 1.7111 3.84%

Today's Market Highlights

Tuesday’s data calendar is much busier than yesterday, and is likely to give investors much to think over. Focus for the pound, other than any Brexit-related headlines, is set to be the latest set of labour market figures. Expectations are for wage growth to pullback slightly from a post-crisis, to 3.2% on a 3-months-on-year basis though the unemployment rate is expected to hold steady at 4%. Such figures, though short of the previous release, would still show a tight UK labour market, which may entice the Bank of England into hiking rates post-Brexit. An above-forecast release may provide sterling with some relief after a mixed couple of days. 
 
Elsewhere, focus will lie largely with the eurozone, and the release of economic sentiment figures for Germany. Expectations are for the sentiment survey to bounce back to -11.3, a level which would be the highest level since September 2018 though firmly in pessimistic territory. Markets will be looking for a relatively resilient reading after recent eurozone data has begun to rebound modestly from a poor start to the year. Across the pond, US data is of little significance ahead of the Fed’s latest policy announcement tomorrow. Factory orders are the only point of note, expected to increase at 0.3% on a month-on-month basis. The Fed begin their 2-day policy meeting this afternoon. 
 
Comments from other central banks are set to be limited, with no speakers due from any G10 central bankers. The overnight release of minutes from the Bank of Japan’s will provide insight into the BoJ’s latest policy decision and may spark some volatility in the yen.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Average Earnings - Inc. Bonus (3m/y) 3.2% 3.4%
09:30 GBP Unemployment Rate 4.0% 4.0%
09:30 GBP Claimant Count Change 2.7k 14.2k
10:00 EUR German ZEW Sentiment Survey -11.3 -13.4
14:00 USD Factory Orders (m/m) 0.3% 0.1%
23:50 JPY BoJ Monetary Policy Meeting Minutes