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Weekly market wrap-up

Treasury Team

After a turbulent week in British Politics, including Theresa May saying she would step-aside as PM if her deal was voted through, Parliament closed the week on Friday rejecting for a third time May’s Brexit Bill. Mrs May stated after the vote that ‘the implications of the House’s decision are grave’ and ‘the legal default now is that the UK is due to leave the E.U on the 12th April- In just 14 days’ time’.

The RBNZ joined the dovish Central Bank’s party last week by saying they expect next move to be a cut generating a 1.6% overnight drop in the kiwi. The ECB mentioned they are working on tiered deposit rates to avoid the negative impact of negative interest rates on banks, EUR closed the week almost 1% lower, with German bunds falling deeper into negative waters. On the US, Treasury yields hit new lows for the year and the market continues to price cuts towards 2020.

The Hong Kong Monetary Authority stepped in again last Thursday for the 6th time this month to defend its currency peg to the US Dollar by buying another $500m worth of HKD dollars, bringing the total cost of this month’s ‘defence payments’ to nearly $2bn. The peg of the two currencies has been in place since 1983.

US Consumer Confidence Index now stands at 124.1, down from 131.4 in February; 2018 4Q GDP came in below expectations at 2.2% (exp. 2.3%), and below 3Q (2.6%). On top of that, the US preferred inflation gauge, the Core Personal Consumption Expenditure Index, eased to its weakest level in 11 months in January. The reading supports the Fed’s view on interest rates last week, when the central bank said it would keep rates on hold this year amid growing concerns over weakening global growth. Despite that, the US dollar was the second-best performer last week.

China’s Manufacturing PMI, reported on Sunday, came in much better than expected at 50.5 (vs. 49.6 expected - the first data post above the 50 contraction/expansion level for the first time in over four months), with new export orders starting to show signs of recovery from previous month’s weak levels. The market has opened the week on a positive tone and investors will be trying to confirm if this data is a signal that China’s latest policy easing is starting to kick in or if this is just data volatility following a seasonally low February (Chinese New Year).