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Will Theresa see the Ides of March?

Will Theresa see the Ides of March?

Speculation over a leadership challenge to Theresa May and ongoing political uncertainty kept the Pound under pressure yesterday. Political jitters eased slightly during the day despite reports of a multilateral move to derail the EU Withdrawal Bill where parliamentary debate continues today. We also await confirmation that Conservative MPs will, as rumoured, sign a letter of no confidence in the Prime Minister.

Andy Haldane, the Bank of England’s chief economist, opined that inflation was likely to stay above target for the next few years; helping to push Sterling back above 1.3100 against the Dollar and the Euro tested support just below 1.1235.

Today’s inflation data brings expectations of a further small increase in the headline CPI rate to 3.1% from 3.0%. A larger-than-forecast increase would maintain pressure for the Bank of England to raise interest rates at a faster pace. Comments from bank officials will also continue to be monitored closely with Jon Cunliffe (usually dovish) and Ben Broadbent (usually hawkish) due to speak today.


The US Dollar was relatively stable yesterday after slipping against most of its major peers last week due to skepticism that the tax reform will be passed before the new year as the two Republican-led legislatures put forward differing bills.

US Treasury Secretary Mnuchin, while speaking in Washington yesterday, reiterated that he prefers a corporate tax cut next year. He also explained how he was not concerned with the Senate tax bill, which would delay the corporate tax cut, however, there were minor differences in the House. Mnuchin reiterated Trump’s goal which is to have a target of 3% growth or higher.

After a lack of economic data last week, we have consumer price inflation, retail sales, and housing market data to look forward to this week. Tax reform will continue to be a major market variable as the two sides attempt to align their legislation in time for Thanksgiving. This afternoon, in the American session, we see the US Producer Price Index data.


The Euro found support yesterday against the Dollar, gradually strengthening across the day and reaching highs of 1.1694. A slightly different message against the Pound as levels hovered around 1.1240 mark but did drop to lows of 1.1195.

These changes in rates weren’t the most volatile but uncertainty in monetary policy going forward is still in question. Yesterday, the European Central Bank’s (ECB) Vice President Constancio spoke of easy monetary policy still being necessary, expressing that the fact inflation is still below target means the ECB should not be complacent on positive developments.

Further net Euro support came from German bund yields as they moved higher across the day while a more protective mood regarding risk appetite limited potential for Euro selling to fund investors taking advantage of the low interest rates.

Today for the Euro we have several potential market movers: German HICP inflation coupled with European Union GDP and Industrial Production followed by a Draghi speech will certainly keep investors on their toes.

Data To Watch:

07:00 EUR Gross Domestic Product (YoY) (Q3), Harmonised Index of Consumer Prices (YoY) (Oct)
08:05 USD Fed’s Evans Speech
09:00 EUR ECB’s Lautenschläger Speech
09:30 GBP Producer Price Index – Output (MoM)(YoY) n.s.a (Oct), Producer Price Index – Input (MoM)(YoY) n.s.a (Oct), PPI Core Output (MoM)(YoY) n.s.a (Oct), Consumer Price Index (YoY) (MoM) (Oct), Core Consumer Price Index (YoY) (Oct)
10:00 USD Fed’s Yellen Speech, EUR ZEW Survey – Economic Sentiment (Nov), ZEW Survey – Current Situation (Nov), GBP BOE’s Governor Carney speech, EUR Gross Domestic Product s.a. (QoQ) (YoY) (Q3), EUR ECB President Draghi’s Speech, EUR Industrial Production w.d.a. (YoY) (MoM) (Sep)
13:15 USD Fed’s Bullard speech
13:30 EUR ECB Cœuré Speech
17:30 GBP MPC Member Cunliffe Speech

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