Home Daily Commentaries May survives and the pound shows some resilience.

May survives and the pound shows some resilience.

Daily Currency Update

Markets and the pound breathed a sigh of relief almost last night as the Prime Minister Theresa May survived the vote of no confidence brought against her government by opposition leader Jeremy Corbyn. In many ways the events last night highlight a number of interesting points. Firstly, the pound clearly does not want a general election. For the last two or so years the discourse around pound strength has been around a ‘soft’ Brexit because it brings consistency and certainty. The same can be said for the current government and clearly investors do not want the added uncertainty of a general election. Secondly, from the outset it seems that the result of the vote was highly anticipated and whilst the margin was only 19, all MPs voted along party lines and May’s victory was all but certain after the Dup and influential ERG backed the PM. This begs one final point, why did the leader of the opposition declare bring forward the motion of no confidence if the numbers were so stacked. Around 72% of Labour voters want a second referendum, yet their leader remains a closet Eurosceptic who voted for Britain to leave the European Community in 1975.
Therefore whilst the PM may now find herself unsure as to which direction to turn, does Jeremy Corbyn have much more of an idea?


Moving forward, the Prime Minister now has until Monday to knock out a plan B.

Key Movers

The shutdown continues in the US and the longer it continues the more it is talked about due to the simple fact that it limits economic data that can be reported. The House of Representatives (Democrats) passed another bill last night to end the shutdown, however as expected it does not include any funds for the border wall, so desperately desired by the government. The concern for federal workers affected is that neither sides are any closer to a compromise. Interestingly though polls from the Washington Post suggest that Americans overwhelmingly that it is Trump and the Republicans in Congress who are responsible for the impasse. There has already been around half a percent taken of Q1 GDP growth in all likelihood but the dollar remains resilient.


Yesterday the ECB's Villeroy and Nowotny both spoke in a relatively quiet day for European markets. Villeroy stated that any rate increases from the ECB would depend on economic development whilst Nowotny talked about how there is no danger of a recession in the Eurozone. This is interesting because Germany could find itself on the brink of a recession come February when its Q4 GDP numbers are released and warning about recessions always suggests that there are some underlying concerns.




For the ECB and Mario Draghi himself it would appear that they are in no rush to hike rates any time soon but the ECB may have missed the boat entirely when it comes to normalizing rates. We may go through an entire economic cycle without any tightening from the ECB and Draghi at all.


The Aussie dollar looks like it will end the week on the back foot as Westpac’s Consumer Confidence survey fell by 4.8% in at the start of the year. Indeed the survey came in below the magic 100 level for the first time since November 2017 and the ‘cautious optimism’ that went through 2018 seems to have evaporated at the turn of the year.


The Canadian dollar always seems to move into the back of the week with important data still to come. This time its December inflation numbers which are expected to contract. For the year though inflation should come in at a modest number of 1.7% and could provide some relief for the Loonie which is on the back foot against the USD this week.


The New Zealand dollar is also struggling overnight with real estate figures disappointing reminding investors of the strain in the global economy at the moment, which is directly impacting New Zealand and the Kiwi. Next week CPI figures for Q4 will be the highlight for the New Zealand dollar.

Expected Ranges

  • GBP/USD: 1.2790 - 1.2950 ▼
  • GBP/EUR: 1.1205 - 1.1355 ▼
  • GBP/AUD: 1.7820 - 1.8005 ▼
  • GBP/CAD: 1.6980 - 1.7135 ▼
  • GBP/NZD: 1.8875 - 1.9120 ▲