Meaningful delay26th February 2019
The February CBI retail sales index held at 0, just below forecasts but there were expectations of a March recovery. Sterling dipped before lunchtime and another official UK source reported that a Brexit deal conclusion was unlikely this week. The market perception assumes that a ‘no-deal’ would be avoided through parliamentary manoeuvres and the money market Options sales indicated that Sterling demand was at five-week highs. Sterling made back lost ground later in the session, supported in part by stronger global risk conditions and further gains in oil prices.
The Pound recovered from lows around 1.2970 to close around 1.3050 against the Dollar while the Euro was little changed below 1.1500. Theresa May continued talks with EU officials over the weekend and will continue the dialogue on Monday. She also stated that the final meaningful vote would be held by March 12th which increased speculation that Brexit will have to be delayed as speculation dominated markets.
President Trump tweeted late-Sunday last night that the US-China trade talks are very progressive and he will delay the March 1st deadline for a tariffs hike on China’s products. He also said he will hold a summit with his Chinese counterpart in Florida.
Comments from San Francisco Federal Reserve (Fed) President Daly were relatively balanced with the need to be vigilant on upside and downside inflation risks, although she also remarked that stronger wages growth had little impact on inflation. Philadelphia head Harker stated that the Fed was not far from an efficient level on the balance sheet while Governor Quarles stated that it was appropriate to keep the balance sheet big enough to buffer reserve shocks.
CFTC data is still catching up from the government shutdown, but delayed data still indicated a substantial net long, speculative Dollar position. It will be an interesting week for the buck in light of Powell’s testimonies on Tuesday and Wednesday, the Trump-Kim meeting on February 27-28 in Vietnam and a Q4 GDP estimate on Thursday.
There was a glimmer of hope for the single currency on Friday which was compounded by a weak Dollar. Advances, however, were limited due to the fact that economic data from the region remains poor. German IFO numbers came in below consensus; they had 0.0% growth for Q4 GDP and the EU’s January inflation figures fell 1.5% month-on-month but rose 1.4% year-on-year.
Little happened with EURUSD, but the big news over the weekend was surrounding Brexit and May’s delay to the vote. Data today is minimal, with only Swiss Employment due, and then at 10 am, the Bank of England Governor Carney’s speech which will attract some attention.
Data to watch:
05:00 JPY Leading Economic Index (Dec)
10:00 GBP BoE’s Governor Carney speech
13:30 USD Chicago Fed National Activity Index (Jan)
16:00 USD Fed’s Clarida speech
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