Previous Day's Market Highlights
Sterling was the worst performing major currency on Thursday, with the pound continuing to be weighed down by the ongoing political stalemate over Brexit. Markets have become more cautious since Wednesday’s indicative votes, where no alternative Brexit option found a majority, with the likelihood of an ‘accidental’ no-deal exit increasing as time ticks down towards the 12th April deadline. Despite a planned vote on just the Withdrawal Agreement today (see section below) it remains in the balance whether the deal will pass meaning the political limbo is set to continue into next week. Over the course of the day, the pound lost 0.8% against the dollar, and was 0.6% lower against the euro - with both pairings falling to their lowest level for a week.
Elsewhere, the dollar was the best performing major, gaining 0.3%, despite below forecast GDP figures. For the final quarter of last year, the US economy grew at 2.2% on an annualised basis, a sign of slowing growth momentum heading into this year, something that is likely to reinforce the Fed’s “patient” viewpoint. Other majors traded within tight ranges, though the euro continued to decline, notching up its 5th day of declines in the 6 trading days. The single currency fell 0.2% over the day, not helped by below forecast CPI inflation figures from Germany which are likely to keep the ECB firmly in their dovish monetary policy stance. Overnight, the yen has held steady despite better than expected data which showed the unemployment rate ticking down to 2.3% in March. CPI inflation for the Tokyo area had little impact on the currency, being released in line with forecasts at 1.1% on a year-on-year basis.
Away from FX, equity market moves were also relatively muted. In Europe, the Stoxx 600 was down 0.1%, while London’s FTSE 100 was flat on the day. Meanwhile, in the US, markets rallied modestly, with the benchmark S&P 500 adding 0.35%. Oil prices were more volatile, falling after President Trump tweeted that prices were getting too high and OPEC should ease production cuts. Both Brent and WTI lost more than 1%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today will once again be dominated by Brexit, with the government bringing forward a vote on only the Withdrawal Agreement this afternoon. This is therefore not a ‘meaningful vote’ as the Political Declaration, the document outlining plans for a future trading relationship, will not be put to the Commons. By tabling just the Withdrawal Agreement, the government are enabling the UK’s exit from the EU to be finalised, and for the UK to leave on 22nd May after a short Article 50 extension while leaving the door open for potential changes to the plans for the future relationship. This has been dubbed a “blindfold Brexit” - where the UK will leave the EU, but have no framework for a future relationship with the bloc. However, it remains in the balance whether such a vote will be successful, with both Conservative eurosceptics and the DUP still planning to vote against the deal due to the contentious Irish backstop. Another failure of the deal would see further political headwinds for the pound, with MPs then facing the choice of a no-deal exit on 12th April, or a longer extension to Article 50 to negotiate an alternative deal. Voting is due to begin at around 2:30pm, with results due shortly after.
Elsewhere, the data calendar is busy, with focus likely to fall on this afternoon’s release of Core PCE inflation from the US, the Fed’s preferred inflation measure. Expectations are for prices to have increased at 1.9% on a year-on-year basis in January, unchanged from December’s level and set to further reinforce the Fed’s patient stance. Other notable data points include GDP from the UK and Canada in addition to final University of Michigan consumer sentiment data this afternoon, though the UK’s GDP reading will be overshadowed by developments in Parliament. Three central bank speakers are also scheduled, all from the Fed, with Williams, Kaplan and Quarles due to speak throughout the day.
Looking ahead to next week, the main economic data point will be the monthly US labour market report, where markets will be looking for the headline nonfarm payrolls number to bounce back from a disappointing 20,000 last month. Wages and the unemployment rate will also be in focus, as markets look for the US labour market to remain relatively tight. Other notable data includes the usual round of PMI surveys in addition to labour market figures from Canada. The Reserve Bank of Australia will also announce their latest policy decision, with expectations growing that the RBA will strike a dovish tone, possibly laying the groundwork for a rate cut later this year.
Today's Economic Calendar
|08:00||CHF||KOF Leading Indicator||93.9||92.4|
|09:30||GBP||Final GDP (q/q - Q4 18)||0.2%||0.2%|
|12:30||USD||Core PCE Price Index (y/y)||1.9%||1.9%|
|14:00||USD||Final UoM Consumer Sentiment||97.8||97.8|
|Approx. 14:00||GBP||Parliamentary Vote on Brexit Withdrawal Agreement|