Previous Day's Market Highlights
The pound fell sharply on Friday, coming under further pressure after MPs voted against the Brexit Withdrawal Agreement for a third time. Sterling briefly fell by around 0.8% after the vote result was announced, erasing earlier gains made after various eurosceptic Conservative MPs announced that they would be backing the deal. After the announcement that the Withdrawal Agreement had been defeated by a margin of 58 MPs, the pound began to slide, briefly trading under $1.30 to hit its lowest levels since mid-March, along with similar moves against most other major currencies. The result of the vote means that Article 50 will now be extended until 12th April, at which point the UK is due to leave the EU with or without a deal. However, an emergency EU summit will be held on 10th April, potentially to agree another extension to the negotiating period if Parliament has agreed on a consensus way forward - likely to centre around some form of customs union. Over the course of the day, the ongoing political uncertainty continued to drag the pound lower, with sterling chalking up its third consecutive day of losses against both the dollar and the euro, trading around 0.25% lower against each.
Elsewhere, the dollar struggled, trading flat on the day, after core PCE inflation figures missed expectations. Data showed prices increasing at a below-forecast 1.8% on a year-on-year basis in January, less than the 1.9% forecast and under the Fed’s 2% target level. The disappointing reading from the Fed’s preferred inflation gauge will likely reinforce the Fed’s dovish policy stance. Meanwhile, the euro edged down once again, sliding 0.15% lower, towards the $1.12 mark to record a 4th consecutive day of losses. There was better news for commodity currencies however, with the Australian, Canadian and New Zealand dollars all gaining on Friday. The loonie was the best performer, adding 0.7% after GDP figures for January recorded an increase for the first time since October 2018. The Canadian economy grew at 0.3% in January, allaying some fears of an economic slowdown and offsetting negative data from November and December. The Aussie and Kiwi dollars both gained around 0.35%, largely down to global markets striking a more risk-on tone.
Elsewhere, equity markets made strong gains, with indices buoyed by US-China trade talks in Beijing. The pan-European Stoxx 600 gained 0.6% on Friday, while the US benchmark S&P 500 added 0.7%, rounding out its best start to the year since 1998. In commodities markets, oil prices gained further on Friday, with both Brent and WTI adding around 1%. Both blends of crude gained almost 30% in the first quarter, with WTI recording its best first quarter since 2009.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
The week begins with a busy data calendar, with significant data points due from the UK, eurozone and US throughout the day.
In the UK, markets will likely be focusing once again on developments in Westminster, with Parliament set to hold further indicative votes in an attempt to agree a consensus way forward for the Brexit negotiations. This is likely to centre around a ‘softer’ Brexit than previously proposed, possibly incorporating a customs union into the exit deal. However, even if Parliament were able to find a majority for a way forward, the votes are not binding on the government, hence the political uncertainty is set to continue throughout the week as investors try to second-guess the Government’s next move. Looking at the data calendar, manufacturing PMI figures may be of interest, though the impact of pre-Brexit stockpiling has been artificially inflating the index of late. Expectations are for a fall to 51.3, a level which would be the lowest since October 2018.
Meanwhile, in the eurozone, focus will likely fall on the flash estimate of CPI figures for March, especially after the ECB downgraded their expectations for inflation in the eurozone at their last policy meeting. Forecasts show headline CPI expected at 1.5% on a year-on-year basis in March, unchanged from the previous month. However, of more concern to markets and to policymakers will be the likely dip in the less-volatile core CPI measure, with expectations of just a 0.9% increase in prices when energy and food are stripped out. Also of note will be final manufacturing PMI numbers which are likely to be in line with the previously released flash estimate, reinforcing the economic slowdown in the bloc with a reading of just 47.6 - well into contractionary territory.
Across the pond, focus in the US will also fall on manufacturing data, though expectations are for the ISM PMI survey to rebound to an index level of 54.5 after a sharp drop last month. This would be a reassuring sign for markets, with fears beginning to emerge that the US economy is slowing along with the rest of the world. Retail sales numbers for February will also pique some interest, with sales likely to moderately increase at a rate of 0.3% on a month-on-month basis.
Looking ahead to the remainder of the week, the calendar remains busy. Focus is likely to fall on Friday’s US labour market report, with markets expecting nonfarm payrolls to bounce back after a surprisingly low increase of only 20,000 in February. Wage growth and unemployment numbers will also attract attention with expectations for the data to show US labour market conditions remaining relatively tight. Other points of note include Tuesday’s Reserve Bank of Australia meeting, where the RBA may signal an upcoming rate cut, as well as Wednesday’s services PMI figures and Friday’s canadian labour market data.
Today's Economic Calendar
|09:00||EUR||Final Manufacturing PMI (Mar)||47.6||47.6|
|09:30||GBP||Manufacturing PMI (Mar)||51.3||52.0|
|10:00||EUR||CPI Flash Estimate (y/y)||1.5%||1.5%|
|10:00||EUR||Core CPI Flash Estimate (y/y)||0.9%||1.0%|
|13:30||USD||Retail Sales (m/m)||0.3%||0.2%|
|15:00||USD||ISM Manufacturing PMI (Mar)||54.5||54.2|
|Tentative (Evening)||GBP||Parliamentary Indicative Votes on Brexit|