Previous Day's Market Highlights
Sterling recorded strong gains on Monday, adding more than 1% across the board and recording its biggest day of gains against the euro in 6 weeks, after the Prime Minister moved to delay the UK’s departure from the European Union - a sharp U-turn away from her previous stance that the UK would be leaving on 29th March. PM May outlined to the commons that, after today’s vote, a 2nd meaningful vote would be held on or before 12th March. Then, if that vote failed, MPs would hold 2 votes over the following days on whether to proceed with a no-deal exit, or to extend the Article 50 period for a “short and limited” time. Markets took solace in the fact that a “cliff edge” no-deal scenario would be avoided, for now, with a vote in favour of extending article 50 likely to succeed. As markets began to price in a delay to Brexit, the pound rallied to its highest levels against the euro since May 2017 and its highest levels against the dollar since mid-September 2018.
Away from Brexit, the Bank of England MPC’s testimony to the Treasury Select Committee was rather a non-event, with Gov. Carney merely reiterating the comments made at the MPC’s meeting earlier this month. In contrast, Fed Chair Powell’s testimony resulted in a broadly weaker dollar, with the greenback losing 0.3% against a basket of peers. Powell’s comments did not touch directly on interest rates, however did reiterate the Fed’s “patient” nature going forward and emphasised the “cross-currents” affecting the current economic outlook. The dollar was not helped by economic data, with housing starts falling to their lowest level since September 2016 in January. Elsewhere, the euro benefitted from the dollar’s weakness to climb by around 0.2% while commodity currencies also rallied as crude prices remained well supported.
Away from FX, European equity markets had a mixed day. Despite the pan-European Stoxx 600 index adding 0.3%, the UK’s FTSE 100 fell by around 0.4% - largely as a result of sterling’s rally. Markets in the US closed marginally higher, with the benchmark S&P 500 gaining by around 0.2% after a choppy trading session. Finally, crude oil prices rallied, with international benchmark Brent adding 0.7% as Saudi-led OPEC production cuts continued to underpin 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 lie with this evening’s parliamentary vote on the way forward for the Brexit negotiations. The government are set to table a neutral motion, outlining their planned way forward, which MPs will then attempt to amend. Though the motion itself is symbolic and non-binding, amendments to the motion can be legally binding, including Yvette Cooper’s proposed amendment mandating an extension of Article 50 if no deal has been reached by March 13th. The amendment is still being laid to seek confirmation of the Prime Minister’s commitment yesterday to hold a series of votes on extending the negotiating period. Should the amendment pass, the pound would likely react positively as the ‘no-deal’ option would be taken off the table. Other amendments tabled, but with less chance of passing, include one from the Labour party requiring a UK-EU customs union alongside another requesting the government to guarantee citizens’ rights post-Brexit.
Elsewhere, the dollar will likely take its lead from the second day of Fed Chair Powell’s testimony to Congress, with any comments relating to the balance sheet run-off and the pace of further monetary policy tightening likely to command the most market attention. The day’s main economic data comes from Canada, with the release of CPI inflation figures for January. Expectations are for the headline CPI figure to fall to 1.5% on a year-on-year basis, largely due to falling energy prices. Such a lacklustre inflation reading would likely deter the BoC from hiking rates in the near-term. Meanwhile, no significant economic data is due from the eurozone, with only consumer confidence figures set for release.
A couple of central bank speakers are due in the European session, with markets due to hear from the ECB’s Coeuré and Weidmann though any comments are likely to be broadly in line with last week’s ECB minutes. Finally, President Trump will be meeting North Korean Leader Kim Jong-Un for the first day of their summit in Vietnam.
Today's Economic Calendar
|13:30||USD||Durable Goods Orders (m/m)||0.2%||0.2%|
|13:30||CAD||Core CPI (y/y)||1.7%|
|15:00||USD||Fed Chair Powell Testimony (Day 2)|