Vote Delays and Delay Votes
Bank of England (BoE) Governor Carney’s testimony to the Treasury Select Committee was largely centred on the implications of a no-deal Brexit outcome but the market was unmoved, preferring to focus on political manoeuvring.
The Pound continued its resurgence on expectations that Theresa May would confirm the lady is for turning in her parliamentary update. The Prime Minister’s statement confirmed that the House of Commons would be given votes on delaying Brexit or ruling out the possibility of a no-deal outcome if her Withdrawal Agreement isn’t approved by March 12th. The market perceived a higher chance that a no-deal would be ruled out and, after a brief correction, Sterling strengthened sharply. EU officials indicated that a Brexit delay until the end of June could be accepted, but not beyond.
The Pound registered five-month highs above 1.3280 against the Dollar and fifteen-month highs above 1.1630 against the Euro. Technical price corrections have been limited so far ahead of today’s parliamentary debate.
In testimony to the Senate, Federal Reserve (Fed) Chair Powell reiterated that the Fed will take a patient approach to future monetary policy changes. He also stated that there were some signs of stronger wages growth and he expected inflation to run close to the 2% target. There were also comments that the Fed is in a position to evaluate the appropriate timing and approach for ending the balance sheet run-off.
US consumer confidence rose sharply to 131.4 for February from a revised 121.7 previously and was well above consensus expectations which suggested that the Federal government shutdown had been a significant factor in January’s decline. The Richmond Fed manufacturing index also rebounded strongly to 16 for February from -2 previously. There was also a notable rebound in the Philadelphia Fed non-manufacturing index while inflation pressures also eased in the survey.
The Dollar gradually lost ground in US trading and retreated to three-week lows as US-German yield spreads narrowed with expectations that the Fed balance sheet reduction would be suspended this year.
Yesterday saw the shared currency benefit from Dollar weakness. Having said that, the gains were fairly minimal; the pair traded within a 50-pip range despite weak data out of the US. The pair hit 1.1400 which was a three-week high, but continuing fears over economic growth in the region kept any Euro gains in check. Dollar gains were also limited by a very strong day for the Pound.
Data today sees the European Central Bank’s (ECB) Coeure speech this morning. It is followed by consumer and business confidence out of Italy, EU money supply and private loans, the ZEW survey out of Switzerland and then the German Buba President Weidmann’s speech. The data will be rounded off by business, industrial and consumer confidence numbers out of the EU. However, the data will be overshadowed by developments in the UK’s parliament over Brexit.
Data to watch:
08:30 EUR ECB’s Cœuré speech
09:00 CHF ZEW Survey – Expectations (Feb)
10:00 EUR German Buba President Weidmann speech (Germany)
N/A EUR 10-y Bond Auction (Germany)
13:30 USD Durable Goods Orders (Jan)
13:30 USD Nondefense Capital Goods Orders ex Aircraft (Jan)
13:30 USD Durable Goods Orders ex Defense (Jan)
13:30 USD Durable Goods Orders ex Transporation (Jan)
13:30 CAD BoC Consumer Price Index Core (YoY) (Jan)
13:30 CAD Consumer Price Index – Core (MoM) (Jan)
13:30 CAD BoC Consumer Price Index Core (MoM) (Jan)
13:30 CAD Consumer Price Index (MoM) (Jan)
N/A USD Fed’s Chair Powell Testifies
15:00 USD Pending Home Sales (MoM) (Jan)
15:00 USD Factory Orders (MoM) (Dec)
23:50 JPY Industrial Production (YoY) (Jan)
N/A JPY Foreign investment in Japan stocks (Feb 22)
N/A JPY Foreign bond investment (Feb 22)
23:50 JPY Retail Trade (YoY) (Jan)
23:50 JPY Retail Trade s.a (MoM) (Jan)