Meaningful vote looms
Yesterday could not please the Sterling market as various news outlets conveyed the EU-UK differences on the Irish backstop, which could be the reason for delivering a no-deal Brexit. There are now fewer chances of having an agreement before next week’s British parliament vote on the UK PM Theresa May’s second referendum.
Latest developments on the Brexit plan suggest the UK PM is likely pushing the EU leaders to accept her Irish backstop plan. However, the EU has already given until Friday for the British policymakers to come up with something new for the Irish backstop to regain the region’s confidence.
According to ITV news correspondent Angus Walker, the UK Attorney General Geoffrey Cox and UK Brexit secretary Stephen Barclay’s trip to Brussels has been called off as the UK PM May is now said to be making a last-ditch plea to the European Union for concessions this morning.
With no major event for the Pound today, Brexit jitters will likely take the reigns.
The USD index (which tracks the Dollar against a basket of other major currencies) gathered extra pace in response to the dovish message from the European Central Bank (ECB) at its meeting, advancing to new 2019 highs.
The major attention today will be on the February US employment data at 13:30 GMT. Market consensus suggests an increase in average hourly earnings to 3.3% and a dip in the unemployment rate to 3.9% compared to earlier prints of 3.2% and 4.0% respectively. The nonfarm payrolls may decline to 180K from 304K.
Today’s publication of February’s Payrolls should re-focus the attention to the health of the US economy and the prospects of the Fed’s QT in the next months. On another front, and following the recent strong appreciation in the Buck, some cautiousness is expected to emerge over the likelihood of further criticism by President Trump of the Fed’s monetary policy and the exchange rate.
The ECB provided a dovish surprise to global markets yesterday. The ECB revised down its gross domestic product (GDP) forecasts for the years 2019 and 2020 while cutting down on inflation predictions for 2019, 2020 and 2021. Additionally, forward guidance to the interest rate was also changed from through the summer of 2019 to at least through the end of 2019. In addition, and fuelling the downside in Euro strength, the new ECB forecasts for growth and inflation in the region for the next few years were larger than expected.
The sentiment around the shared currency is expected to remain under heavy pressure as market participants continue to adjust to the fresh dovish stance from the ECB and the prospects of no hikes at least until Q3-Q4 2020. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections, where the focus of attention will be on the potential increase of the populist option among members.
There will be no significant releases in Euroland today.
Data to watch:
07:00 EUR Factory Orders s.a. (MoM) (Jan) (Germany)
13:30 USD Building Permits (MoM) (Jan)
13:30 USD Housing Starts (MoM) (Jan)
13:30 USD Nonfarm Payrolls (Feb)
13:30 USD Average Hourly Earnings (YoY) (Feb)
13:30 USD Average Hourly Earnings (MoM) (Feb)
13:30 USD Labor Force Participation Rate (Feb)
13:30 USD Unemployment Rate (Feb)
13:30 CAD Participation rate (Feb)
13:30 CAD Net Change in Employment (Feb)
13:30 CAD Average Hourly Wages (YoY) (Feb)
13:30 CAD Unemployment Rate (Feb)
16:30 EUR ECB’s Mersch speech