The Brexit Select Committee reiterated that a ‘managed no-deal Brexit’ wouldn’t be a responsible policy for any government, and the Pound gained initially before suffering a price correction later in the day. The EU reiterated that there was no room to change the Withdrawal Agreement and the chances of the UK crashing out without a deal were now very high. Sterling failed to regain ground due to the high degree of uncertainty surrounding Amendments to Withdraw Bill, especially given doubts any alternatives would get a majority.
The Pound also suffered from a renewed decline in global risk appetite, a sharp retreat in oil prices, and cautious markets also wary over potential month-end selling pressures. Sterling was supported below 1.3150 against the Dollar while the Euro pushed back down to the 1.1500 mark. The Pound awaits further political developments, and we will release a report with the proposed Withdrawal Bill amendments as soon as they’re announced.
The US Chicago Federal Reserve (Fed) national activity index strengthened slightly to 0.27 from a revised 0.21 previously, although there were significant missing elements given the government shutdown impact and uncertainty dominated. The Dollar was also still hampered by speculation that the Federal Reserve could announce a scaling back of plans to shrink the balance sheet at Wednesday’s meeting.
There are not any data releases on the schedule for today in the US. Tomorrow will be a significant day for the Greenback, however, as consumer confidence statistics are due out and trade talks will resume between the US and China. The World Trade Organization reportedly launched an investigation into President Trump’s China tariffs which will undoubtedly cloud the conversations. We also have the Fed rate decision later this week, with markets currently pricing in a 97.9% probability that interest rates will be left unchanged.
President Draghi corroborated reports that economic data is set to remain weak and has been weaker than expected over the last few months. He tried to offset this by saying labour-market dynamics and rising wage growth were underpinning the Euro.
German bond yields moved higher and money supply for the Eurozone increased to a six-month high, but private loans growth remained unchanged. Versus the Dollar, the single currency rose to 1.1440 and has remained at that level since.
Data today is basically non-existent for the Eurozone but the market will focus on the UK and the latest round of votes on Brexit. Despite the fact that the vote is expected to take place after business hours, we can expect news to come out during the day which will create some volatility.
Data to watch:
14:00 USD S&P/Case-Shiller Home Prices Indices (YoY) (Nov)
15:00 USD Consumer Confidence (Jan)
N/A GBP UK Parliamentary vote on Brexit Plan B
23:50 JPY Large Retailers’ Sales (Dec)
23:50 JPY Retail Trade s.a (MoM) (Dec)
23:50 JPY Retail Trade (YoY) (Dec)