Home Daily Commentaries May tries to build bridges on Brexit.

May tries to build bridges on Brexit.

Daily Currency Update

Prime Minister, Theresa May and other members of the cabinet have been holding a series of meetings with MPs from across the political spectrum in an effort to try and break the Brexit deadlock. Senior MPs from the Democratic Unionist Party, Liberal Democrats, Plaid Cymru and the Scottish National Party all met with May in the aftermath of her confidence vote victory on Wednesday evening. All day yesterday further talks were held with members of the Tory European Research Group, Senior members of the 1922 committee as well as several Labour MPs. Noticeably absent from the meetings has been Labour leader, Jeremy Corbyn who is refusing to meet the PM face to face until he gets a guarantee that a “no-deal” Brexit will be ruled out. The PM obviously cannot openly promise this to Corbyn as it will remove some of her negotiating leverage with the EU. May is set to present an amended proposal to the commons on Monday with a vote due on January 29th. GBP/USD made a play for 1.30 yesterday evening for the first time since early November however has since fallen away towards the 1.2950 handle. Confidence is growing in the markets that a no-deal Brexit will be avoided adding support to sterling. Should an amended plan fail when voted on later this month then an extension to Article 50 looks almost certain which will likely also add support to the pound. As a footnote we have UK Retail Sales from the UK this morning. Don’t expect much reaction from the normally market moving data.

Key Movers

The dollar has regained some ground against the yen over the past 24 hours as we end the week slightly risk-on. Global equity markets around the world are up on dovish comments from Chicago Fed President Charles Evans who reiterated that the Fed was likely to pause its tightening cycle. We also had a far better than expected Philly Fed Manufacturing Index which ticked up to 17 from 9.4 a much bigger jump than the move to 9.7 predicted. The summary of the report concluded: “The firms’ responses indicated continued growth in the region’s manufacturing sector this month. The survey’s broad current indicators remained positive, and the indexes for activity and new orders improved.” Despite the move higher in USD/JPY, EUR/USD continues to trade sideways hovering around the 1.14 handle.

It’s been a quiet end to the week for the Eurozone with little data to trouble investors’ diaries. The big news from the past 24 hours was that Greek Prime Minister, Alexis Tsipras survived another vote of confidence in parliament. An argument with its northern neighbor Macedonia who shares its name with a province in Greece was at the root of the turmoil however Tsipras managed to survive the vote by the tightest of margins, 151-149. Returning uncertainty over Greece would have provided another headwind for the euro which is being held back by a slowdown in its major economies on the back of the Trump trade offensive. GBP/EUR sits at 1.1355.

Despite the markets finishing the week risk-on, the Aussie has slipped back under .72 against the greenback with no firm positive developments over the US/China trade dispute likely the cause of the slip. Next week’s employment figures from Oz provide the next big domestic event of note. GBP/AUD is at 1.8030.

Today’s main data-set from across the Atlantic is Canadas monthly inflation figures due for release at lunchtime. Another monthly slip of -0.4% is predicted for December, mirroring Novembers fall. USD/CAD sits around 1.3275 with GBP/CAD at 1.7180.

Like the Aussie, the Kiwi is slipping back as European markets get going. NZD/USD is back down to .6750 with GBP/NZD at 1.9170. There is no top tier data from NZ next week so direction for the local buck and much of the rest of the world will be taken from Chinas Q4 GDP number due late Sunday night/Monday morning.

Expected Ranges

  • GBP/USD: 1.2860 - 1.3000 ▲
  • GBP/EUR: 1.1270 - 1.1410 ▲
  • GBP/AUD: 1.7925 - 1.8105 ▲
  • GBP/CAD: 1.7080 - 1.7270 ▲
  • GBP/NZD: 1.9065 - 1.9250 ▲