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May returns from Strasbourg with Brexit concessions…maybe

By Hamish Muress

At the bottom of the ninth it finally appears that Theresa May could have secured the concessions from the EU that she was promising. At the start of yesterday it looked like the Prime Minister had wasted the last few weeks and the only thing she’d achieved was running down the clock. However, after a quick jaunt across to Strasbourg the Prime Minister has returned with “legally binding” changes to the Irish backstop which could not “become permanent”.

The pound matched yesterday’s antics as well. Having walked in over the weekend with sterling firmly on the back foot as various Brexit headlines trickled in curtesy of Laura Kuenssburg there was more than a 2% swing over the course of the day for the currency against the USD. This was on a non – vote day and there could be further swings over the course of the week when Parliament meets possibly three times to vote on Brexit. The big question tonight is whether May’s concessions are enough to swing 115 votes in her favour but as one of my colleagues pointed out last night, it’s “basically useless, note the term – reduces the risk”.

Elsewhere, if you want to get a good idea of how Brexit could impact the UK economy GDP figures are set to be released today in perfect timing.

The US stock market can barely make up its mind at the moment (much like my ex-girlfriend) as it posted its biggest one day gain since January following its worst week since the start of the year despite Boeing shares falling 6%. For the dollar yesterday was mixed with better than expected retail sales figures for January whilst the December numbers were revised down. We will get an update of inflation numbers today out of the US which could see core inflation figures come in at 0.2%.

Yesterday’s highlight for the Euro came from the normally political neutral ECB as council member Benoit Couere got his teeth stuck into Italy. Couere announced yesterday that Italy was the only Eurozone country that is not growing which is factually correct but will not help the ECB’s image towards Italy’s populists. Apart from that it’s a pretty quiet week for the Euro so GBP/EUR will take its orders from Brexit.

The Aussie dollar managed to edge out some small gains overnight and managed to recover following the release of house financing data and NAB’s business survey. The business survey showed confidence falling whilst profits also dropped but there are a couple of large options propping up the currency around $0.700.

The Canadian dollar managed to push against its US counterpart yesterday as oil prices rose around 1.4% in the US. However the Loonie is thoroughly under pressure at the moment as the currency hit two month lows last week amid growing concerns about the Canadian economy. Chanced for the Bank of Canada to cut its interest rates this year have dropped to 20% but investors and increasingly taking short positions out against the Canadian Dollar.

As mentioned yesterday there are no major economic releases from the New Zealand dollars this week so similar to the Euro it will take its orders from elsewhere. For the Kiwi this will most likely be from China but given the fact that US – China talks have taken a temporary break we don’t expect too many updates.