Deal still appears doomed
The Pound was undermined by fresh political risk following Jeremy Corbyn’s call for a general election and Sterling sentiment dipped. The Brexit Withdrawal Agreement debate continued and despite reports that a couple of MPs have changed stance to back the deal, there was still very strong expectations the deal won’t pass the Commons vote next Tuesday. Japanese Prime Minister Abe opined that “the world does not want to see a ‘no-deal’ Brexit” and markets expect ongoing parliamentary manoeuvring in an attempt to find a resolution.
An oil prices recovery and stable risk conditions limited Sterling selling and the Pound settled around 1.2750 on the Dollar. The Euro peaked at 1.1049, which was a 2019 high, before drifting back to 1.1075.
This morning sees a raft of UK data, the November GDP, Industrial and Manufacturing Production data and the Goods Trade Balance.
The US Dollar has rebounded somewhat from the lows seen earlier this week as the US-China trade negotiations hit a bump in the road. The market now awaits the outcome of these negotiations, with any further tariffs expected to strengthen the Greenback.
US jobless claims declined to 216,000 in the latest week from a revised 233,000 the previous week which still indicated a robust labour market. However, forthcoming data is liable to be distorted by the partial US government slowdown.
Minneapolis Federal Reserve (Fed) President Kashkari reiterated that he was opposed to further rate hikes while Chicago head Evans stated that the Fed could easily assess the data for six months. Chair Powell reiterated that the Federal Reserve has the ability to be patient given the inflation data with no pre-set path on rates. His principal concern was the global economy and potential impact on the US. Although, he stated that markets are pricing in a more pessimistic view than is apparent in the data. He also stated that the balance sheet will end up substantially lower than it is now, although the endpoint is still not certain.
Yesterday saw a slight resurgence in the Dollar, with the Euro testing the 1.1500 mark. This was on the back of more positive news out of the US, with Powell suggesting that the Fed is being deliberately patient. The recovery was short-lived, however, and the pair started trading again at the 1.1520 level.
December’s European Central Bank (ECB) meeting minutes pointed towards concern over economic growth and downside risks. To counter this, however, there was a sharp decline in oil prices which were upside risks to the general outlook meaning, effectively, one cancelled out the other.
With virtually no data due in mainland Europe, all eyes will be on the UK’s GDP number for November and CPI ex-food and energy from the US.
Data to watch:
00:00 USD FOMC Member Clarida speech
00:30 AUD Retail Sales s.a. (MoM) (Nov)
09:30 GBP Manufacturing Production (YoY) (Nov)
09:30 GBP Manufacturing Production (MoM) (Nov)
09:30 GBP Industrial Production (MoM) (Nov)
09:30 GBP Goods Trade Balance (Nov)
09:30 GBP Gross Domestic Product (MoM) (Nov)
13:30 USD Consumer Price Index Core s.a (Dec)
13:30 USD Consumer Price Index (MoM) (Dec)
13:30 USD Consumer Price Index Ex Food & Energy (YoY) (Dec)
13:30 USD Consumer Price Index (YoY) (Dec)
13:30 USD Consumer Price Index Ex Food & Energy (MoM) (Dec)
18:00 USD Baker Hughes US Oil Rig Count
19:00 USD Monthly Budget Statement (Dec)