GBP - British Pound
GBP took focus during the Asian trading session after a vote in the Commons last night forced the government to avoid a no-deal Brexit. Despite May opposing the bill herself, won by a single vote and therefore May must once again travel to Brussels in order to try and attain a further extension from leaving the European Union.
Before this happens, the bill must be approved by the upper chamber, however most expect the Lords to give a thumbs up. Sterling was expected to react very positively to news such as this however GBP/USD only jumped 30 pips on the news.
A common theme recently seen with sterling is that the currency doesn’t respond to headlines/news as much as expected. A key reason to consider is that the consistent volatility over the past few months has caused traders to become less interested in trading the pound – or at least try and guess where it’s going. CME data shows that interest in sterling options and futures fell to their lowest level since mid-2015.
May’s Tories and Corbyn’s Labour Party held initial discussions yesterday on their cross-party Brexit deal alternative on Wednesday and both described the process as ‘constructive’. Both parties have agreed to appoint teams to discuss the matter and these talks will continue to take place over the coming weeks
The Euro gained against the U.S. Dollar on Wednesday as news of U.S.-China trade talk progressions came from Washington. Hopes of progressed trade talks boosted risk appetite globally for both consumers and investors. Alongside this, the Australian dollar outperformed on strong local and Chinese economic data.
More negative news was posted out of Germany on Thursday morning. Despite not being a key market mover, it further highlights the current economic crisis within the Eurozone. German factory orders were expected to come in at 0.3% whereas actually came out 4.5% lower than forecasted at -4.2%. This data highlights the total value of new purchase orders placed with manufacturer’s month on month. With concerns that President Trump may hike tariffs on cars from the EU to the US from 2.5% to 25%, the news is very disheartening for the EU’s largest economy.
After a day of positive PMI data for the Eurozone, from Spain Italy and France, this data is a real blow once again for consumer and investor confidence.
Data from the U.S. on Wednesday showed that private employers added 129,000 jobs in March, below economists’ expectations and the lowest since September 2017. The U.S. Dollar was fairly unresponsive to this data, highlighting the importance of more pressing issues in the market, such as the ongoing trade war with China. Investors are next focused on Friday’s government employment report for March for further indications on the strength of the U.S. labor market and wage inflation.