D-day Friday, for now.9th April 2019
Friday saw Sterling fall to a three-day low as the market dissented to another Brexit extension after Theresa May wrote to the EU President requesting an exit date at the end of June. The PM believes that she can gather cross-party support around the “framework for a future relationship”. Donald Tusk was reported to have suggested a twelve-month extension so that the UK MPs can decide on what they want. The US Dollar got a boost from positive economic data whereas Brexit uncertainty continues to weigh on the Sterling, dragging it down across the board.
Over the weekend there were more significant political rumblings. The Jewish Labour Movement voted to pass a motion of no confidence in Jeremy Corbyn as Labour leader. Theresa May released a “cosy video chat” to the nation which, in summary, suggested that Brexit will only occur with a jointly agreed a deal with the Labour Party. The UK is currently due to leave the EU on Friday and unless cross-party agreement appears, it’s “no-deal” or “no-Brexit”. GBP is likely to remain under pressure, closing lower for the third-week in a row.
According to analysts, the US economy, the consumer price index could have increased significantly in March (+0.4% m/m), reflecting a surge in gasoline prices. However, the Dollar is trading on the back foot at the beginning of the week following market chatter of extra stimulus in the Chinese economy and recent positive results from the US docket.
Auspicious prints from Friday’s Non-farm Payrolls in combination with positive developments from the US-China trade front have collaborated with the recovery in the riskier assets, allaying at the same time concerns over a potential global slowdown.
Looking ahead, Factory Orders during February will be the only publication of note later in the NA session and ahead of the FOMC minutes and CPI figures on Wednesday and the flash U-Mich index on Friday.
It is fair to say Friday saw a strong Dollar only add to the Euro’s problems. Weak data from virtually all corners of the Eurozone all points towards a slowdown in the region and the European Central Bank (ECB) confirmed this by confirming their plans of keeping interest rates where they are for longer.
Donald Tusk wants to offer the UK a more flexible and longer extension to try to come to a conclusion. There are reports, however, that France, Belgium and Spain want to offer only a two-week extension as they see a longer extension as a loss of integrity for the EU. If they win their motion the UK will face a crunch vote, but Germany seems to support Tusk’s suggestion which hopes to avoid a no deal at all costs.
Data today includes German imports, current account, trade balance and exports. The last piece of data is the EU sentix investor confidence but aside from this, all eyes will be on news out of the EU and May’s meetings with Labour.
Data to watch:
06:00 EUR Trade Balance s.a. (Feb) (Germany)
14:00 USD Factory Orders (MoM) (Feb)
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