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Sterling unmoved by Labour MP resignations

By Jake Trask

It was another tumultuous day in British politics yesterday as seven Labour MPs decided to break ranks from the party in protest at the way the party was being led by Jeremy Corbyn. Luciana Berger, Anne Coffey, Mike Gapes, Chris Leslie, Angela Smith, Gavin Shuker and Chuka Umunna are all now standing as independents in parliament in protest at supposed bullying and anti-Semitic views within Labour’s hierarchy. It should be noted that all seven MPs are calling for a second referendum which may be a reason why sterling actually moved higher as the news was announced. As mentioned yesterday, there is another series of talks between PM Theresa May other cabinet members and EU representatives this week as May tries to break the deadlock before a vote in parliament due on 27th Feb which could see May lose control of negotiations and an extension to Article 50 being requested. GBP/USD trades around 1.2930 ahead of wage growth numbers due later this morning.

US workers return to their desks today after the Presidents Day bank holiday yesterday which is held to commemorate the birthday of first US President George Washington. What began as a risk on start to the week on the back of some encouraging words from US President Donald Trump on progress re: trade talks with China has turned slightly risk off this morning with some comments from the Chinese side highlighting there is still some way to go to resolving the dispute. This week’s main event from the States will be tomorrow night’s release of the minutes from the last FOMC meeting, with markets looking for clues over policy moves from the Fed. Today’s calendar is pretty light so we could see most US crosses pretty range bound for the next 24-36 hours. USD/JPY trades around 110.75 with EUR/USD at 1.1320.

The euro has started today on the front foot with EUR/USD pushing up around 25 pips in early trade. With little data due until later this morning its likely the growing likelihood of an extension to Article 50 being requested and reports that EU car sales will be exempt from US tariffs are pushing the shared currency higher. The monthly German ZEW Economic Sentiment report scheduled for 10am is due to once again highlight economists are pessimistic on the state of the German economy although a reduction from -15 to -14.1 is viewed. GBP/EUR trades at 1.1425.

The minutes from the Reserve Bank of Australia were released overnight showing that policy makers are currently in no mood to adjust interest rates. The RBA is currently seen as being of neutral bias with the global trade war impacting the health of Australia’s biggest trading partner, China’s, economy. Recent falls in house prices were also highlighted as an area of concern however given the huge rises seen over recent years a correction could be seen as a good thing. The Aussie was relatively unmoved by the publication as nothing unexpected was stated. Next up from Down Under is tonight’s wage growth numbers. AUD/USD trades a touch lower at .7115. GBP/AUD is at 1.8165.

With its southern neighbor enjoying a long weekend it was a quiet start to the week from Canada with no data and little moves in the USD/CAD rate leaving it hovering around the 1.3250 handle at present. This week’s main data is due on Friday with another poor Retail Sales m/m number expected. GBP/CAD trades at 1.7125.

NZD/USD currently sits at .6830 in a week devoid of any domestic data of note. Developments re: the US/China trade talks and the FOMC minutes will be the main mover of the kiwi this week. GBP/NZD trades at 1.8910.