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Labouring towards a softer Brexit

Labouring towards a softer Brexit

UK construction PMI bounced back from 39.5 to 49.7 in March but ultimately marks a second successive month in contraction. Commercial activity was undermined by Brexit, although business optimism rose modestly. The Pound dipped to near 1.3000 amid on-going fears over political deadlock but reports that Oliver Letwin and Yvette Cooper were introducing a Bill to prevent a ‘no-deal’ Brexit on April 12th stemmed the sell-off. Following a ten hour Cabinet meeting, Theresa May requested a further short extension to Article 50 in order to avoid a ‘no-deal’ outcome. She also announced further talks with Jeremy Corbyn and the Labour Party in order to break the deadlock; which has generated heated opinion within her own party.

Hopes of a compromise and a potentially ‘softer’ Brexit allowed Sterling to move back above 1.3100 against the Dollar with the Euro below 1.1700. The market remains very cautious over severe Conservative Party tensions, parliamentary divisions and uncertainty over the EU,  but firmer global risk conditions have helped underpin Sterling this morning.


Expectations of a further extension of zero interest rates undermined the Dollar while dovish rhetoric from global central banks outside the US underpinned the Greenback even with market expectations of a Federal Reserve (Fed) rate cut this year.

Headline US durable goods orders declined 1.6% for February compared with an expected decline of 1.1% while the increase in core orders was held to 0.1% and capital goods orders also declined marginally. There was a notably muted reaction to the data.

There was a strong New York ISM business survey which boosted confidence in the outlook and helped support the dollar. The US Dollar gained net backing with an advance to three-week highs as commodity currencies declined.


The Euro struggled to break clear of the 1.1200 mark versus the Dollar on the back of expectation that the period of zero interest rates is likely to be extended further. This, combined with the fact that the US look like they are closer to a trade deal with China, means that the pair struggled to a twenty-one month low of 1.1185 before recovering slightly on the back of the news that the UK might be getting closer to agreeing on a Brexit compromise.

It is final PMI numbers day today, with figures due out from Italy, France, Germany, Spain and the EU. The final pieces of data are the retail sales figures out of the EU and the UK’s PMI numbers. Last night saw May reach out to the Labour party in order to try and get the deal through, which saw the Pound rise versus both the Dollar and the Euro.


Data to watch

00:30 AUD Imports (Feb)
00:30 AUD Exports (Feb)
00:30 AUD Trade Balance (Feb)
00:30 AUD Retail Sales s.a. (MoM) (Feb)
01:45 CNY Caixin Services PMI (Mar)
08:00 EUR Markit PMI Composite (Mar)
09:00 EUR Retail Sales (YoY) (Feb)
09:30 GBP Markit Services PMI (Mar)
12:15 USD ADP Employment Change (Mar)
12:30 USD Fed’s Bostic speech
13:45 USD Markit Services PMI (Mar)
13:45 USD Markit PMI Composite (Mar)
14:00 USD ISM Non-Manufacturing PMI (Mar)
21:00 USD Fed’s Kashkari speech
23:50 JPY Foreign Investment in Japan Stocks (Mar 29) 

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