Brexit week finally arrives (again).
Monday 11 March, 2019
Daily Currency UpdateSo once again this week presents the opportunity for some concrete Brexit progress to be made, but come Friday we may still be in the same position. There are three key dates and votes to look out for this week on the 12,13th and 14th. If Theresa May is defeated on Tuesday and her Withdrawal Agreement is rejected which is likely as we can’t see her swinging 115 votes with the limited changes she’s secured then Parliament rolls onto the vote on the 13th (Wednesday). At this point the House of Commons will decide on whether to leave the EU without a deal i.e. in a No Deal Brexit scenario. This idea in all likelihood will be rejected as well and so we come to the 14th (Thursday). Vote number 3 will see the House of Commons vote on postponing Brexit. This is where the uncertainty will kick in because either Westminster will vote for an extension or some of the influential ERG and Tory backbenchers could look at May’s agreement once again rather than being stuck in the EU maybe indefinitely. As things stand the pound is in a state of paralysis trading just above the 1.30 level which is seen by many investors as the border between certainty and uncertainty.
Key MoversThe USD is currently playing a blinder as it manages to continue to edge out gains in the face of global headwinds and lackluster economic data. The USD index, a measure of the USD against a basket of currencies, hit its highest levels since the middle of 2017 and even last week’s disappointing headline jobs number failed to dent the USD in any meaningful way. Elsewhere the summit between President Trump and Chinese President Xi has a been pushed back until at least next month with the two leaders set to meet at Mar-a-Lago. Reports out of the trade teams indicate that final details are proving to be difficult to finalise and neither leaders want to face any embarrassment.
The Euro rout continued right up until the end of last week as it fell against the USD on four days. On top of this and significantly the currency pair also dropped below 1.12 for the first time since the middle of 2017. The dovishness seen from the ECB last week was also exacerbated by a number of key ECB officials saying that growth forecasts could still be too optimistic.
The Aussie dollar, or the proxy for the Chinese economy, closed down at the end of last week against the USD but this time it fell to just shy of the significant 0.700 level, seen last at the very start of the year. There is little of note for the Aussie this week apart from tomorrow and NAB Business Confidence survey.
The Canadian dollar managed to stand strong in the face of USD strength at the end of last week as the labour market continues to strengthen. Indeed the Canadian jobs market is off to its best start since the start of 1981.
The Kiwi managed to finish last week on the front foot against its US counterpart but the manufacturing figures did little to excite the currency markets. It will be a quiet few weeks for the New Zealand dollar and it could be at the mercy to the dreaded currency markets.
- GBP/USD: 1.2870 - 1.3205 ▼
- GBP/EUR: 1.1520 - 1.1700 ▼
- GBP/AUD: 1.8430 - 1.8605 ▼
- GBP/CAD: 1.7390 - 1.7600 ▼
- GBP/NZD: 1.9005 - 1.9360 ▼