The lady’s not for listening26th March 2019
Monday morning saw more choppy trading for the Pound and an early dip to near 1.3160 against the Dollar. Sterling regained ground on increasing speculation that a third meaningful vote would occur this week, before renewed selling as the US came online after lunch. Northern Ireland’s DUP stated that they would not support the deal and Theresa May conceded that there was still not enough support (yet) for her Withdrawal Agreement. Lower bond yields added negativity and Sterling failed to hold above 1.3200 against the Dollar, while the Euro pushed back down to the 1.1655 area.
The Pound briefly strengthened after the House of Commons defeated the government on Brexit. There will now be “indicative votes” on Wednesday in an attempt to find majority support for a Brexit policy, fuelling speculation over a ‘softer’ compromise. Underlying uncertainty remained extremely high with three government ministers resigning to vote against the government. Theresa May highlighted she would be unbound by the indicative votes and would try to gather support for her deal. Sterling is hitting selling interest above 1.3200 and there’s still no let up to the high volatility.
The inversion of the US Treasury yield curve was the talk of the town yesterday. The fear of an imminent recession is driving global equity markets lower. The US Dollar traded with a soft tone against the major currencies.
Philadelphia Fed President Harker stated that inflation would need to rise and stay above 2.0% for a while to justify an interest rate increase and that he does see the circumstances for a hike in the short term.
The Chicago Fed National Activity index registered a reading of -0.29 for February from a revised -0.25 previously as the three-month moving average dipped into negative territory. The index was undermined by weakness in manufacturing and the small increase in non-farm payrolls.
Sentiment on the US outlook remained cautious after mixed data and fundamental doubts. Overall yield trends undermined the Dollar and commodity currencies were also able to make some headway.
Perhaps surprisingly, yesterday saw German numbers improve slightly, bucking the trend of the last few months. The IFO figure strengthened for March, above market expectations, demonstrating that the economy, according to the IFO, was showing resilience after truly awful PMI numbers last week. Versus the Dollar, the pair reached a high of 1.1331 but lacked follow-through and settled just above the 1.1300 mark despite German yields rising slightly.
There is very little data today, but the German Gfk consumer confidence survey kicks off the action, swiftly followed by French GDP and French business climate numbers. Slightly later are mortgage approval figures out of the UK, then finally the Bank of England’s (BoE) Broadbent speaks at 11am. In what seems to be a recurring theme, the data today will be overshadowed by the fallout from the UK Parliament’s Monday evening vote.
Data to watch:
00:30 USD Fed’s Rosengren speech
07:00 EUR Gfk Consumer Confidence Survey (Apr) (Germany)
08:45 USD Fed’s Harker speech
11:00 GBP BoE’s Broadbent speech
12:30 USD Housing Starts (MoM) (Feb)
12:30 USD Building Permits Change (Feb)
13:00 USD S&P/Case-Shiller Home Price Indices (YoY) (Jan)
13:00 USD Housing Price Index (MoM) (Jan)
14:00 USD Consumer Confidence
23:10 AUD RBA’s Kent speech
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