Previous Day's Market Highlights
The pound traded modestly higher on Monday as Parliament voted to take control of Brexit away from the Government. MPs voted in favour of an amendment, by a margin of 27, that would give backbenchers control over business on Wednesday to permit time for a series of indicative votes to be held on the way forward for Brexit with the aim of finding a consensus for one option which can then be negotiated with the EU. Options are likely to include the Prime Minister’s deal, a customs union, leaving without a deal and several more - with the Speaker set to decide the final choice to be voted on. Though this may be seen as a near-term political headwind for the pound, adding to already high levels of uncertainty, the votes may point the way towards an eventual ‘softer’ Brexit, a positive outcome for sterling. Over the course of the day, the pound gained around 0.2% against both the euro and the dollar, though struggled above the $1.32 and €1.1675 resistance levels.
Elsewhere, the euro strengthened modestly after upbeat business confidence figures from Germany, the bloc’s largest economy. The monthly IFO sentiment survey beat forecasts, reaching a 3-month high at a level of 99.6, in notable contrast to the pessimistic picture painted by last week’s manufacturing PMI figures. The single currency gained 0.25% over the day. In contrast, the dollar traded unchanged on the day, weighed down by falling Treasury yields which remained near 15-month lows. Meanwhile, the antipodeans performed well, reversing Friday’s losses, with both the Aussie and Kiwi dollars gaining around 0.5%.
Away from FX, continuing fears over the future health of the global economy weighed down equity markets on both sides of the Atlantic. The pan-European Stoxx 600 lost just over 0.4%, while the US benchmark S&P 500 was 0.1% lower. Finally, oil prices continued to firm, underpinned by OPEC-led supply cuts tightening the market. Global benchmark Brent added 0.45% on Monday, with US WTI crude trading 0.2% higher.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today’s economic calendar is light, lacking any major releases from the UK or the eurozone. With this in mind, focus for both the pound and the euro is once again set to fall with political developments in the UK. Markets will keep a keen eye on the options being tabled for tomorrow’s indicative votes, as well as keeping track on the Prime Minister’s efforts to convince MPs to vote in favour of her Withdrawal Agreement ahead of a possible third meaningful vote later this week. Brexit-related headlines may also cap any euro appreciation, particularly if the chances of a disorderly ‘no-deal’ exit begin to increase.
The US calendar is busier, with a focus on housing and confidence numbers. Housing starts and building permits are both forecast to decline modestly from the previous month, a negative for the US economy with both being useful leading indicators for future economic activity. House prices are also expected to have increased at a slower rate, 4% year-on-year, another possible sign of a slowing economy. Consumer confidence will also be closely watched after preliminary gauges showed an uptick in sentiment. Any data surprises to the upside would likely see the dollar find support, as the US economy continues to perform ahead of its G7 peers.
Overnight, focus will shift to the Reserve Bank of New Zealand (RBNZ) and their latest monetary policy decision. Despite unanimous market expectations for rates to be kept on hold at their current level of 1.75%, though the RBNZ’s stance may shift to the dovish side of the spectrum, in line with other global central banks. However, a rebound in Q4 GDP, back to 0.6% on a quarter-on-quarter basis, may be enough to stop the RBNZ moving away from their tightening bias, with the maintaining of such a bias likely to see the Kiwi dollar well-supported. No other central bank meetings or speakers are due today.
Today's Economic Calendar
|12:30pm||USD||Housing Starts (m/m)||1.22m||1.23m|
|12:30pm||USD||Building Permits (m/m)||1.3m||1.32m|
|1:00pm||USD||S&P Home Price Index (y/y)||4.0%||4.2%|
|1:00am (Wed)||NZD||RBNZ Interest Rate Decision & Statement||1.75%||1.75%|
|2:00am (Wed)||NZD||RBNZ Press Conference|