Previous Day's Market Highlights
Thursday’s parliamentary vote to request an extension of the Article 50 negotiating period did little to support the pound, with the result largely expected after Wednesday’s rejection of a no-deal Brexit. Sterling nudged lower by around 0.2%, paring some of its recent advance but still on track for its best week of gains in the last 2 months after the Commons voted in favour of an extension by a margin of 211 MPs. The government now plan to request an extension to Article 50 at next Thursday’s EU summit, however a 3rd meaningful vote on the Withdrawal Agreement before then cannot be ruled out, especially if the Prime Minister can win round support from MPs who have previously rejected it. A tail risk relating to the extension is that unanimous approval is required from EU leaders for such a measure to be implemented, something which is not guaranteed. Furthermore, the length of such an extension remains unknown, with some EU leaders seemingly pushing for a longer extension, taking the UK past the date of European elections.
Elsewhere, the economic calendars were quiet in both the UK and Europe, though the single currency edged lower by around 0.2%, holding just above the key $1.13 support level. The US calendar was busier though data painted a mixed picture. On a positive note, import prices rose 0.6% in January, hitting a 3-month high. However, both initial jobless claims and new home sales missed market expectations, with the latter falling 6.9% on a month-on-month basis to its lowest level since October 2018. Nonetheless, the dollar was the best performing major currency on Tuesday, gaining just shy of 0.3% against a basket of peers.
Overnight, the Bank of Japan concluded their latest monetary policy meeting, where both interest rates and bond yield targets were left on hold - as expected with inflation remaining stubbornly low. However, the BoJ did strike a cautious tone, downwardly revising its assessment on output and exports as the effects of a global economic slowdown begin to be observed. The yen traded flat, with such action having been widely expected.
Away from FX, European equity markets firmed with the pan-continental Stoxx 600 index adding 0.8%. In contrast, US markets snapped a 3-day streak of gains, after the benchmark S&P 500 lost 0.1%. Finally, crude prices were further supported on Thursday, with Brent climbing above the $68bbl mark for the first time since November 2018.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today’s focus will shift back to economic data, with no Brexit-related news expected. The main economic highlight will be final CPI inflation figures from the eurozone, expected to show consumer prices increasing at 1.5% on a year-on-year basis in February. More attention will be paid to the less-volatile core measure, which removes food and energy prices, with core inflation expected to remain unchanged at 1%. After the ECB struck a dovish tone at their last monetary policy meeting, the data is unlikely to change their policy outlook, however markets will use the figures as a guide to the health of the euro-area economy.
Other highlights come from the North American session, with significant attention likely to focus on the University of Michigan consumer sentiment figures, expected to show sentiment improving to an index level of 95.3. With the US economy driven largely by consumer spending, an increase in sentiment would be seen as a positive for the US economy as a whole. Elsewhere, the US will also release industrial production figures for January in addition to manufacturing sales numbers being released from Canada - neither typically has much market-moving potential. Only one central banker is due to speak, with the BoJ’s Kuroda addressing markets this morning.
Looking ahead to next week, the calendar is busy once again, with central bank meetings coming into focus. The Federal Reserve (Weds), Bank of England (Thurs) and Swiss National Bank (Thurs) will all announce their latest monetary policy decisions, with no expectations for a policy change from any of the three banks. However, significant attention will be paid to the Fed’s latest economic forecasts (including their projected path of interest rate increases), the BoE’s assessment of the impact of Brexit on the UK economy and any comments from the SNB on the valuation of the Swiss franc. Other data highlights include labour market reports from the UK and Australia as well as the latest round of eurozone PMI surveys. Finally, there are reports that a possible 3rd meaningful vote could be held on the Brexit Withdrawal Agreement, likely on Tuesday or Wednesday.
Today's Economic Calendar
|10:00||EUR||Final CPI (y/y)||1.5%||1.5%|
|10:00||EUR||Final Core CPI (y/y)||1.0%||1.0%|
|13:15||USD||Industrial Production (m/m)||0.4%||-0.6%|
|14:00||USD||Prelim. Michigan Consumer Sentiment Index||95.3||93.8|