Brexit Stalemate Continues

The pound declines as Parliament fail to agree on a way forward for Brexit ahead of today's busy data calendar.

Previous Day's Market Highlights

The pound traded lower on Wednesday after another volatile trading day where sterling gyrated in line with a barrage of Brexit-related news. The pound made some headway late in London trading, after the Prime Minister’s announcement that she would step down for the 2nd stage of Brexit negotiations if the Withdrawal Agreement was passed. This announcement was swiftly followed by a number of eurosceptic Conservative MPs switching sides to back the deal, increasing its chances of passing should a 3rd meaningful vote be held this week - possibly on Friday. Higher chances of a deal passing boosted sterling to its highest levels of the day, rallying 0.6% before encountering resistance and $1.3270 and €1.1780. However, the pound’s gains were quickly erased after the DUP indicated they would be unable to back the deal. Also weighing on the pound were last night’s indicative votes on alternative Brexit options, with no single option being able to find a majority - dragging on the political uncertainty to a ‘run-off’ between the most popular choices on Monday. Parliament has now rejected the PM’s deal, no deal and the alternative options, hence the market’s cautious tone awaiting some certainty. Over the course of the day, sterling was 0.4% lower against the dollar, while losing 0.25% against the euro. 
Elsewhere, commodity currencies struggled, with the antipodeans continuing to be weighed down by the RBNZ’s dovish message. The kiwi dollar ended the day 1.7% lower, while its Australian counterpart was 0.9% lower as expectations of an RBA rate cut continued to increase. The Canadian dollar also struggled, losing 0.4%, largely as a result of disappointing trade data along with a steep fall in oil prices. Both the dollar and the euro were largely unchanged, though a narrower than expected trade deficit helped the dollar find some support. 
Away from FX, equity markets struck a cautious tone, with concerns over an economic slowdown continuing to weigh on indices. The pan-European Stoxx 600 closed unchanged, while the US benchmark S&P 500 was 0.45% lower as a further inversion of the yield curve fanned economic worries. Finally, oil prices also fell, sliding as US stockpiles significantly increased. Benchmark Brent lost 0.6%, while US WTI lost 1.25% over the day. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1715 1.1803 1.1463 2.88%
GBP/USD 1.3170 1.3381 1.2939 3.30%
EUR/USD 1.1240 1.1448 1.1176 2.38%
GBP/AUD 1.8556 1.8851 1.8338 2.72%
GBP/NZD 1.9310 1.9542 1.8960 2.98%
GBP/CAD 1.7660 1.7795 1.7328 2.62%

Today's Market Highlights

Today is set to be a busy day for economic data, with focus likely to fall on the US and the release of final GDP figures for the last quarter of 2018. Expectations are for growth to be downwardly revised from 2.6% to 2.4% on an annualised quarter-on-quarter basis, though this figure would still be well above peers in the G7. An above-forecast figure may go some way to allay fears of an impending economic slowdown, though GDP for the first quarter of 2019 is expected to be significantly below trend owing to the government shutdown. Also released from the US will be the weekly initial jobless claims figure, expected to hold steady around the 225k mark. 
Elsewhere, no Brexit-related votes or debates are due to be held, though the pound remains susceptible to any headlines relating to the UK’s divorce from the EU. Of particular interest will be any further MPs switching sides to back the Withdrawal Agreement in addition to potential confirmation of a 3rd meaningful vote being held tomorrow. Meanwhile, the european data calendar is busy, with focus likely to fall on this afternoon’s German inflation data. HICP inflation is expected to decline to 1.6% on a year-on-year basis, re-emphasising ECB President Draghi’s comments yesterday that the balance of risks to the economy is “tilted to the downside”. Markets will also eye business climate and sentiment figures as a leading indicator of economic health. Overnight, focus will move to Japan with the release of inflation and unemployment data, though the yen’s best chances of appreciation remain its status as a safe-haven currency. 
Finally, central bank speakers are aplenty today, primarily from the Fed. Vice Chair Clarida is the pick of the bunch, with speeches from board member Quarles and New York Fed President Williams also due. Markets will be on the look out for any comments clarifying the Fed’s dovish pivot last week. The SNB’s Maechler is also due to speak.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Business Climate (Mar) 0.66 0.69
12:30 USD Final GDP (q/q - annualised, Q4 18) 2.4% 2.6%
12:30 USD Initial Jobless Claims 225k 221k
13:00 EUR German HICP (y/y) 1.6% 1.7%
23:30 JPY Tokyo Core CPI (y/y) 1.1% 1.1%
23:30 JPY Unemployment Rate 2.5% 2.5%