Brexit can kicked into mid-Jan
Sterling remained on the back foot yesterday, trading above 1.2600 against the Dollar on wider US weakness and just above 1.1100 on the Euro. Overall, Sterling continues to trade at 20-month lows against the most major currencies as Pound sentiment remains weak. Theresa May confirmed that there would be no second referendum, that negotiations around the “backstop” were ongoing and that the “meaningful vote” would occur in the week commencing 14th of January 2019.
Theresa May’s intention to run down the Brexit clock prompted Jeremy Corbyn to table a motion for a parliamentary no-confidence vote in PM May’s government, but that is unlikely to force May’s hand or appear until after Christmas. The Pound will remain unattractive to investors and traders alike until a vote on either May or her deal brings back some certainty. There is no UK economic data today, so political rumblings are the only possible domestic drivers until tomorrow.
The Dollar gave up ground today as markets look to the upcoming interest rates announcement and President Trump tweeted his unease with further rate hikes. The market is currently pricing in a 75.3% probability of a 0.25% interest rate hike.
Uncertainty over the Fed’s rate hike path in 2019, coupled with a duo of disappointing US economic data, helped GBPUSD to regain positive traction and rise around 80-pips from 1.2566 to 1.2650.
Today in the US, the second-tier housing market data seems unlikely to provide any meaningful impetus.
Yesterday saw the Italian government approve a new framework and continued to negotiate the budget with the European Commission. PM May told Parliament that they would hold the vote on Brexit in the third week of January, which provoked an angry response from many MPs. What it did point to, however, is the fact that the impact on the Euro from Brexit is diminishing.
Headline inflation for the Eurozone was downgraded to 1.9% and the trade balance was squeezed above market expectations and the German IFO Business Climate is not looking promising.
Data today in the Eurozone is virtually non-existent, aside from the previously mentioned German IFO Business Climate. All eyes will be on data out of the US.
Data to watch:
03:00 AUD RBA Meeting’s Minutes
01:40 AUD HIA New Home Sales (MoM) (Nov)
09:00 EUR IFO – Expectations (Dec) (Germany)
09:00 EUR IFO – Current Assessment (Dec) (Germany)
09:00 EUR IFO – Business Climate (Dec) (Germany)
13:30 USD Housing Starts (MoM) (Nov)
13:30 USD Building Permits (MoM) (Nov)
N/A NZD GDT Price Index
22:00 NZD Westpac consumer survey (Q4)
23:50 JPY Exports (YoY) (Nov)
23:50 JPY Imports (YoY) (Nov)
23:50 JPY Adjusted Merchandise Trade Balance (Nov)
23:50 JPY Merchandise Trade Balance Total (Nov)