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Pound on back foot as PM suffers further Brexit defeat.

By Alex Edwards

Theresa May suffered another defeat in the Commons yesterday. A motion endorsing the government’s negotiating strategy was voted down by 303 to 258, and although it doesn’t have any legal force – a point made by Downing Street – it’s still surely a blow for the PM, who is seemingly putting the blame on Labour saying that Corbyn has “yet again put partisan considerations ahead of the national interest".

Traders are apparently getting a little more used to the Brexit merry go-around and the pound was largely unaffected by the result; it had been pressured lower in the few hours pre-ceding the vote anyhow.

It doesn’t look like markets will settle heading into the end of the week either as investors await any US-China trade talk outcome, Trump is due to sign a bill to keep the government open and more Brexit headlines. UK Retail Sales is due for release at 9:30, too.

Risk sentiment worsened throughout the day yesterday as US retail sales printed a lot worse than markets were expecting; headline Retail Sales m/m come in at -1.2% vs. forecasts for 0.1%. Investors aren’t too hopeful for a positive outcome for US-China trade talks whilst Trump is also expected to declare an emergency over the Mexico border wall.

The dollar, as a safe haven, has strengthened over the last 24 hours as a result.

Looking ahead to today, the US Empire State Manufacturing Index, Industrial Production and Prelim Consumer Sentiment are due for release. Other risk events, already mention, are likely to get most of the attention, however.

German Prelim GDP printed weaker than expected yesterday at 0.0% vs. forecasts for 0.1%. Whilst avoiding a technical recession, it wasn’t exactly good news and EUR/USD fell to a low of 1.1250. The pair meandered for a while but then popped higher in the afternoon following the release of weaker than expected US Retail Sales.

The pair has since settled lower overnight as risk appetite has waned and opens in London at 1.1270.

More of the same for AUD/USD over the last 24 hours as it’s traded a narrow range amid a lack of any local data releases. If anything it’s slightly lower as a result of a broadly stronger dollar and following the release of weaker than expected China CPI data which printed at 1.7% y/y vs. expectations for 1.9% y/y last night.

AUD/USD opens this morning at .7085 with US-China trade talks likely to be the main driver into the end of the week.

The loonie came under heavy selling pressure on Thursday after a disappointing miss from manufacturing sales data. Statistics Canada had reported that manufacturing sales declined 1.3% in December after falling 1.7% in November. USD/CAD traded to a high of 1.3340, but then US retail sales printed, and a lot worse than expected, sending USD/CAD back under the 1.33 figure

NZD/USD has done little since this time yesterday, trading a range between .6805 and .6855. It opens this morning at .6825 with the range likely to remain narrow, at least until we start hearing news from the US-China trade talks.