Groundhog Day in parliament as May presents little changed plan
Tuesday 22 January, 2019
Daily Currency UpdateUK Prime Minister, Theresa May presented her revised Brexit withdrawal agreement plan to parliament yesterday a week after the first proposal got voted down by a record margin. To all observers Plan B looked pretty much exactly the same as Plan A as May hammered home her ongoing mantra that she would look for further concessions re: the Irish border from the EU however MPs should get behind her and avoid a no-deal scenario, which she continues to leave on the table as negotiating leverage. Leader of the Opposition, Labour’s Jeremy Corbyn described it as being like “Groundhog Day” given the only change was the decision to drop the £65 fee being charged to EU citizens to remain in the UK after Brexit. The small olive branch seemed to be well received by markets and GBP/USD finished the afternoon higher briefly breaking through 1.29 however, its more likely May’s refusal to rule out an extension to Article 50 provided the most uplift to sterling. The PM will now try and get further assurances from Brussels re: the backstop with a discussion on time limiting it now being mentioned as an option. This apparent off-the-cuff suggestion from the Polish Foreign Minister, Jacek Czaputowicz, as a way of breaking the deadlock was quickly disregarded by other EU politicians. Parliament is due to vote again on the 29th January. This morning we have wage growth numbers from the UK, however expect these to be overlooked by traders. GBP/USD sits at 1.2885.
Key MoversUS markets were closed for Martin Luther King Day yesterday so trading conditions were thinner than usual and no data released. The US government shutdown continues unabated with no compromise between the Republicans and the Democrats likely anytime soon. Many investors’ eyes will be distracted this week by potential news emanating from the annual World Economic Forum get-together in Davos. The week-long event kicks off today with many noticeable absentees such as Donald Trump, Theresa May and Emmanuel Macron however this may give a higher profile to debate panelists like Sir David Attenborough who is due to talk on climate change and new Brazilian President, Jair Bolsonaro. USD/JPY is back down to 109.40 with EUR/USD at 1.1360.
It’s a quiet start to the week for the Eurozone with little economic data due until Thursday’s monthly batch of PMI numbers and the European Central Bank’s interest rate decision and press conference due that afternoon. Markets will be hoping for an uptick in all the major PMIs after last month’s poor showing. No change in policy from the ECB is almost guaranteed. Estimations on when the bank will finally hike rates mostly straddle H2 2019 and H1 2020. GBP/EUR sits at 1.1340.
AUD/USD has fallen away since the start of the week as concerns over the state of the Chinese economy continue to build following its worst annual showing since 1990. Official data confirmed the Chinese economy expanded at 6.6% in 2018 with the rate of expansion for the fourth quarter slowing to an annualised 6.4%. The official figures are considered only a guideline with most analysts thinking the real level of GDP is much lower, maybe just half the official print. AUD/USD is heading back towards .71 as traders continue the week in a risk off mode.
Like the other commodity currencies the Canadian dollar has fallen away through the start of the week with USD/CAD pushing back up through 1.33 during the Asian session. We have Manufacturing Sales m/m due at lunchtime with fall in November’s production of -0.8% expected. Tomorrow brings Canada’s one top tier data set of the week with Retail Sales figures due. GBP/CAD sits at 1.7185.
New Zealand Prime Minister, Jacinda Ardern is on a tour of Europe at present which included a visit to 10 Downing St yesterday where she complemented Theresa May on her “resilience.” Ardern is now off to Davos to meet other delegates which will likely make headlines in the absence of anything market moving on the domestic front. GBP/NZD trades at 1.9210.
- GBP/USD: 1.2840 - 1.2990 ▲
- GBP/EUR: 1.1285 - 1.1410 ▲
- GBP/AUD: 1.8000 - 1.8190 ▲
- GBP/CAD: 1.7125 - 1.7275 ▲
- GBP/NZD: 1.9075 - 1.9270 ▲