Bercow borks MV III
The Pound slipped lower yesterday morning in what looked to be to start of a slow day. The Ulster Unionists made no indication they would accept the Withdrawal Agreement and therefore there was little chance that key Conservative MPs would revert to accepting the deal. There was some speculation that the EU would scramble an emergency Summit on March 28th to avoid a disruptive EU exit.
Sterling fell sharply following a late ruling by the House of Commons Speaker John Bercow that Parliament could not vote on the Withdrawal Agreement again without substantial changes. The ruling effectively blocked the planned Meaningful Vote III, just ahead of the EU Summit.
In choppy trading, there was a dip below 1.3200 against the Dollar while the Euro strengthened to near 1.1635. Despite the added uncertainty and confusion, Sterling found solid support and rallied to the 1.3270 area. The market speculated that Theresa May would request Article 50 be extended by 9-12 months. The assumption remains that Brexit will be delayed and Sterling edged back to near 1.1700 on the Euro as higher oil prices offered support. In the absence of Meaningful Vote III, UK labour-market data, specifically average earnings, will get the attention.
The US Dollar traded with a softer tone yesterday morning as the market prepares for another week laden with significant event risks. The Federal Reserve (Fed) delivers its policy decision tomorrow whilst WTI is up 0.3% to hover near four-month highs. President Trump’s commentary on interest rates seems to be having an impact on the currency. To drive exports, Trump is calling for the Dollar to be weaker.
The US NAHB builders’ confidence index was unchanged at 62 for March and fractionally below consensus forecasts which had little impact, with markets still cautious over the underlying growth outlook. After hitting highs around 1.1360, the Euro lost traction as the US Dollar also secured a wider recovery. There was, however, Dollar selling interest on rallies with markets continuing to anticipate a dovish Federal Reserve (Fed) stance.
German yields moved higher yesterday which provided some support to the single currency as the spread over US bonds narrowed. Italian yields declined to ten-month lows after a decision not to downgrade the country’s credit rating by Moody’s, which also provided some support. However, the German Bundesbank announced that despite a rise in construction and a rise in private consumption, growth remained subdued due to weak industrial production.
EURUSD hit a high of 1.1360 before the Euro lost some momentum and the Dollar gained some before falling away again. Today’s data sees the UK’s ILO unemployment rate followed by the average earnings excluding bonus numbers for the UK. German ZEW economic sentiment index is due later and these are arguably the pieces of data that will be of most interest.
Data to watch:
00:30 AUD RBA Meeting Minutes
00:30 AUD House Price Index (QoQ) (Q4)
09:30 GBP ILO Unemployment Rate (3M) (Jan)
09:30 GBP Average Earnings Including Bonus (3Mo/Yr) (Jan)
09:30 GBP Claimant Count Change (Feb)
09:30 GBP Average Earnings Excluding Bonus (3Mo/Yr) (Jan)
10:00 EUR ZEW Survey – Economic Sentiment (Mar) (Germany)
10:00 EUR ZEW Survey – Current Situation (Mar) (Germany)
10:00 EUR Labour Cost (Q4)
10:00 EUR ZEW Survey – Economic Sentiment (Mar)
14:00 USD Factory Orders (MoM) (Jan)
N/A NZD GDT Price Index
23:50 JPY BoJ Monetary Policy Meeting Minutes