Today’s rate @ 08:00 1.1540
Morning Report 22.03.2019
Moneycorp & Caxton Dealer Teams
Yesterday’s Market Highlights
The pound experienced a volatile trading day on Thursday, first falling as markets became increasingly concerned over the lack of a Brexit breakthrough, before paring losses after the EU announced that they would be granting an extension to Article 50 and giving the Prime Minister one last chance to pass the Withdrawal Agreement in Parliament. The pound fell to as low as $1.30, and below the €1.15 level, in morning trade, largely as rumours swirled that any extension would be short, worrying markets over the prospect of a no-deal exit. However, such concerns were allayed after President Tusk announced the terms of the Article 50 extension that the EU will grant the UK. Should the UK pass the Withdrawal Agreement in Parliament next week, the Brexit deadline will be pushed back until 22nd May. However, should no deal be passed, Article 50 will only be extended until 12th April at which point other options will be assessed. The two-week postponement to Brexit has provided sterling with support, as the likelihood of no-deal diminishes once again. Over the day, the pound lost 0.1% against the euro and 0.5% against the dollar.
Elsewhere, a couple of central banks announced their latest monetary policy decisions. The Bank of England and Swiss National Bank both announced no changes to monetary policy, though the BoE continued to mention that “gradual and limited” tightening of policy would be required, contingent on the Brexit outcome. The SNB also gave food for thought, commenting that the franc remains “highly valued” and that the FX market situation would be closely monitored. The franc gained 0.5% over the day.
Economic data was of largely low importance, though retail sales numbers from the UK provided a glimmer of good news for the UK economy, showing sales increasing at 0.4% on a month-on-month basis in February. Initial jobless claims from the US beat expectations, aiding the greenback as it climbed 0.6% to erase the majority of the losses seen after the Fed’s dovish monetary policy announcement. In contrast to the dollar, the euro lost ground, closing down by around 0.4%, with below-forecast consumer confidence numbers not helping the single currency.
In other markets, European equities had a mixed day. London’s FTSE 100 gained around 0.9%, largely due to the fall in the pound, though the pan-continental Stoxx 600 dipped by 0.1% – weighed down by declines in German markets. In contrast, US markets rallied strongly, led by technology stocks. The benchmark S&P 500 added 1.09% over the day. Finally, crude oil prices did little on Thursday but remained firm near year-to-date highs as tight supply continues to underpin the market.
Today’s rate @ 08:00 1.1540
Weekly Brief – 22nd March 2019
GBP weekly currency update
It was an interesting week for British politics and the pound. The Brexit process stumbled again and the screws were tightened on sterling in a way not seen for a month and a half. The pound took last place among the major currencies with an average decline of 1.4%. It did so despite some decent statistics from the UK economy. Inflation ticked up to 1.9%. Unemployment fell to a 44-year low of 3.9% and wages were up by an annual 3.4%. Retail sales surprised on the upside, increasing by 0.4% in February.
But Brexit got nasty. The speaker of the House of Commons ruled that the government cannot bring back “substantially the same” meaningful vote again and again. The prime minister harangued MPs for not bending to her will. The EU refused to extend Brexit Day to the end of June, setting 12 April as the deadline if parliament rejects her deal again. So investors have no idea how it all will end: at least that hasn’t changed since last week.
EUR weekly currency update
The euro had a moderately successful week, profiting from the misfortunes of others rather than crafting its own prosperity. It added two-thirds of a US cent and went up by a cent and a half against sterling. On average the euro lost 0.2% to the other major currencies.
Among the economic data, the most important was for (finalised) euro zone inflation and investor confidence. Pessimism declined in Germany from -13.4 to -3.6 and in Euroland as a whole from -16.6 to -2.5. Inflation came in at 1.5%, as expected. Euroland’s trade surplus widened to €17 billion. Of itself that was not remarkable but the zone’s surplus with the United States and its deficit with China grew bigger, potentially increasing tension in both directions: Europe has already announced its wish to balance trade with China and the US president is well-known to be on Europe’s case, especially with regard to German cars.