Commons limit “no-deal” tax options10th January 2019
The Pound started out well supported yesterday but ebbed as political uncertainty undermined support again with tensions increasing ahead of the restart of parliamentary debate on Brexit. Caution increased around EU assurances on the Northern Irish backstop and markets continued to discount the prospect of Theresa May winning the “meaningful vote” on January 15. Tensions increased again after a House of Commons vote which limited the government’s scope for budgetary measures in the event of a ‘no-deal’ outcome. Whilst there is no immediate impact of the move it was perceived as an attempt to make no-deal Brexit less attractive than it was.
The Euro advanced to the significant 1.1110 resistance area and the Pound dipped to near 1.2700 against the Dollar. Further gains in oil prices and increased confidence in the global economic outlook provided some Sterling support allowing a modest recovery against the Dollar and preventing further Euro gains.
The Greenback made slight gains against its major peers yesterday morning. Investors were confident that China and the US will agree on some sort of a trade deal. Tweets from the White House signalled “talks are going very well”.
The US NFIB small-business confidence index declined slightly to 104.4 for December from 104.8 previously and inflation pressures eased slightly, although labour-market indices remained strong. JOLTS data recorded a decline in job-openings to 6.89mn for November from 7.13mn previously, although the data still indicated a strong labour market.
The economic calendar remains very light, and the market is holding its breath, awaiting the usual Trump show regarding trade talks with China.
German industrial weakness and EU economic sentiment both came in below consensus which weakened support for the Euro. This only served to increase fears over the industrial sector, with the futures market predicting that the EU will not raise interest rates until 2020, yet again draining support for the single currency.
Versus the Dollar, the Euro slipped to 1.1422, with the Dollar garnering support from renewed optimism over the trade war with Beijing. This was curtailed by dovish tones out of the Fed.
Early morning trading today has seen oil prices increase which has helped the Euro versus the Dollar to around the 1.1450 mark. Data today consists of German trade balance and imports numbers, the European Central Bank’s (ECB) non-monetary policy meeting, and Italian and EU unemployment rounding off the data.
Data to watch:
02:00 USD President Trump Speech
07:00 EUR Imports (MoM) (Nov) (Germany)
07:00 EUR Current Account n.s.a. (Nov) (Germany)
07:00 EUR Exports (MoM) (Nov) (Germany)
07:00 EUR Trade Balance s.a. (Nov) (Germany)
07:30 CHF Consumer Price Index (YoY) (Dec)
08:00 EUR Non-monetary policy’s ECB meeting
09:00 EUR Unemployment (Nov) (Italy)
10:00 EUR Unemployment Rate (Nov)
13:15 CAD Housing Starts s.a (YoY) (Dec)
13:20 USD FOMC Member Bostic speech
15:00 CAD Bank of Canada Monetary Policy Report
15:00 CAD BoC Interest Rate Decision
15:00 CAD BoC Rate Statement
15:15 CAD BoC Press Conference
15:30 GBP BoE’s Governor Carney speech
16:30 USD Federal Reserve Bank of Boston President Rosengren Speech
18:00 USD 10-Year Note Auction
19:00 USD FOMC Minutes
23:50 JPY Foreign investment in Japan stocks (Jan 4)
23:50 JPY Foreign bond investment (Jan 4)
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