Still no breakthrough with Irish backstop7th March 2019
The Pound is trading in the lower part of the 1.3100 level against the Dollar. The primary driver of the most recent slide stems from talks in Brussels. UK Attorney General Geoffrey Cox and Brexit Secretary Steven Barclay met Chief EU Negotiator Michel Barnier. After three hours of negotiations, the media was told that there was no breakthrough.
Expectations were low from the outset. The UK wants legally-binding changes to the Irish Backstop, setting a time limit or an exit mechanism in the Withdrawal Agreement, while the EU is only ready to offer clarifications and reassurances to the Political Declaration.
UK PM Theresa May plans to bring a revised accord to Parliament on March 12th, and the new agreement may be all too similar to the old one.
The news from the Belgian capital overshadowed positive developments. Markit’s Services PMI came out at 51.3, better than expected and reflecting growth, albeit meagre. Also, Bank of England (BoE) Governor Mark Carney said that the path of rate hikes might be higher than markets expect. It is important to note that the BoE would like to raise rates given the current economic situation, but Brexit uncertainty paralyzes everything, including the Bank.
US President Donald Trump criticized Fed Chair Jerome Powell for raising rates, Quantitative Tightening and wanting a strong Dollar. His wish for a more modest Greenback came true, but only for a short period of time.
The Buck also bucks weak data: the lowest ISM Manufacturing PMI in nearly three years, published on Friday, resulted in a minor blip, but that was about it. The Dollar totally ignored the depressing Construction Spending figure which will subtract from GDP.
Absent fresh headlines from the US-China trade dispute, uncertainty around the Brexit negotiations and auspicious results from the US docket have all been collaborating with the ongoing retracement in the strength of the Dollar.
Today’s ADP report, the Beige Book and Federal Reserve speakers should keep the attention in the Dollar.
EURUSD fell to a two-week low yesterday of 1.1289 in the US session due to strong data from across the pond. Reasonably strong Markit services PMI numbers for the Eurozone seemed to have little influence early on in the session. The EU number was up from at 52.3 as well as retail sales rising by 1.3% month-on-month and 2.2% year-on-year.
The economic docket is very thin today, with the only point of interest being the BoE’s Cunliffe speech at 12.15 and finally another speech by a BoE member Saunders at 17:30. As ever, news on Brexit will be of interest to the market.
Data to watch:
00:30 AUD Gross Domestic Product (YoY) (Q4)
00:30 AUD Gross Domestic Product (QoQ) (Q4)
01:30 JPY BoJ’s Harada Speech
07:26 NZD GDT Price Index
12:15 GBP BoE’s Cunliffe speech
13:15 USD ADP Employment Change (Feb)
13:30 USD Trade Balance (Dec)
15:00 CAD BoC Rate Statement
15:00 CAD BoC Interest Rate Decision
15:00 CAD Ivey Purchasing Managers Index (Feb)
15:00 CAD Ivey Purchasing Managers Index s.a (Feb)
17:00 USD Fed’s Williams speech
17:30 GBP BoE’s Saunders speech
19:00 USD Fed’s Beige Book
21:30 AUD AiG Performance of Construction Index (Feb)
23:50 JPY Foreign investment in Japan stocks (Mar 2)
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