Brexit showdown approaches
Sterling made a last-gasp push on New Year’s Eve, rallying to a high of 1.2814 against the Dollar and 1.1195 against the Euro on the back of comments made by Jeremy Hunt. The market latched on to his suggestion that May’s deal could pass through Parliament if the EU provides clarification that the Irish backstop would be temporary. Also, senior Brexiteer Liam Fox commented that there is a 50-50 chance of “No-Brexit” if MPs reject Theresa May’s Brexit deal.
UK manufacturing PMI is due this morning and is forecast to show the pace of expansion slowed to 52.5 in December after reaching two-month highs of 53.1 in November. Whilst this will be looked at for some short-term trading impetus, the key focus will be on the Parliament debate on UK PM Theresa May’s Brexit agreement, set to resume next week and the meaningful vote planned to be held before January 21.
The Greenback, in terms of the US Dollar Index (DXY), is trading on a sour note at the beginning of the new year.
Against the backdrop of growing expectations of a dovish Fed in 2019 and the partial US government shutdown, relatively thin liquidity conditions aggravated the Dollar’s bearish pressure and turned out to be one of the key factors providing a strong lift to the currency.
In the data space, New Home Sales and November trade data have been postponed due to the federal shutdown, leaving Markit’s manufacturing PMI for the month of December the only release for today.
The single currency has started this week well compared to November’s low – with the Euro increasing 0.2% versus the Pound and 0.25% versus the Dollar. Having said this, as expected over the Christmas holidays, liquidity has been thin which may mean that the currency will struggle to gain any momentum.
The market seems to be optimistic that the US and China are getting closer to a resolution over their trade war which lent support to the notion that the Dollar is still a safe haven for investors.
Today’s data includes Markit Manufacturing PMI numbers for Spain, Italy, France, Germany, the EU and the UK, otherwise, the data is very minimal. The general consensus, however, is that the US monthly jobs report on Friday will determine how the pair perform.
Data to collect:
08:55 EUR Markit Manufacturing PMI (Dec) (Germany)
09:00 EUR Markit Manufacturing PMI (Dec)
09:30 GBP Markit Manufacturing PMI (Dec)
N/A NZD GDT Price Index
14:30 CAD Markit Manufacturing PMI (Dec)
14:45 USD Markit Manufacturing PMI (Dec)