Previous Day's Market Highlights
Sterling pared its recent gains on Monday, pulling back from near 2-month highs as investors began to take risk off the table ahead of tomorrow’s parliamentary Brexit vote. Over the course of the day, the pound lost around 0.4% across the board, trading under €1.15, as it remained unclear whether the DUP or Eurosceptic Tory MPs would back an amendment approving the deal in its current form on the proviso that alternatives to the Irish border backstop are arranged. Despite parliamentary manoeuvring to try and secure backing for various forms of plan ‘B’, the EU’s deputy Brexit negotiator once again reaffirmed that the withdrawal agreement was not up for renegotiation, potentially pouring cold water on the parliamentary motion.
Away from Brexit, economic data was limited with only trade balance figures from New Zealand of note which, as expected, showed a modest trade surplus - the kiwi dollar traded broadly unchanged after the release. Central bank speakers also failed to ignite significant volatility, with ECB President Draghi sticking to the message of last week’s ECB meeting that the balance of risks to the economic outlook had shifted to the downside while BoE governor Carney didn’t touch on monetary policy. Finally, the Canadian dollar was the worst performing major currency, losing around 0.4% on the day – led lower by the falling oil price.
In other asset classes, European equities fell by 0.9%, dragged down by financial stocks while US markets lost around 0.8% as revenue warnings from manufacturing giant Caterpillar and chipmaker Nvidia weighed on indices. Finally, in commodities markets, both Brent and WTI slid by over 2.5%, with the former dipping under $60bbl, as data showed the US added rigs for the first time this year and fears over a Chinese economic slowdown continued to weigh on prices.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Focus for the pound will be this evening’s vote on the government’s Brexit plan ‘B’ proposals, scheduled for around 7pm. While around 18 amendments have been tabled, it is unlikely that all will be called with the decision on which are put to the vote resting with the Speaker of the House. In general, the theme of the amendments focuses around attempts to avoid a ‘no-deal’ Brexit outcome either by an extension of Article 50, a second referendum, or a renegotiation of the Irish border backstop to make the current deal more palatable to the House of Commons. Once the government’s motion has been amended, the Prime Minister will then head back to the EU for further negotiations following the fresh blueprint decided in parliament.
With markets currently pricing an extension to article 50, measures of this ilk could underpin the pound in the near-term while measures amending the Irish backstop are likely to weigh on sterling as this could be seen as a step backwards, with a reopening of the withdrawal agreement necessary. However, it is important to note that, the European Union will have to agree to further negotiations or an extension of Article 50 hence ‘no-deal’ risk has not yet completely dissipated.
Away from politics, the data calendar is slightly busier today though only US consumer confidence figures are likely to have a significant market impact. Expectations are for the index to fall to its lowest level in around 9 months, mainly due to continuing concerns over global growth. Other economic data is less significant and unlikely to cause major market volatility including retail sales figures from Japan and home price growth from the US.
Finally, a couple of central bank speakers are scheduled with the BoE’s Haldane and ECB’s Nowotny both due to speak. It is likely that the latter’s message will remain broadly in line with last week’s ECB meeting however market participants will be looking for hints of post-Brexit interest rate increases from the BoE.
Today's Economic Calendar
|2:00pm||USD||S&P/Case-Shiller Home Price Index (y/y)||5.0%||5.0%|
|Approx. 7:00pm||GBP||Parliamentary Brexit Vote||225m||-861m|
|11:50pm||JPY||Retail Sales (y/y)||0.8%||1.4%|