Monday has seen risk markets attempt a partial recovery with the momentum mainly driven by the news that UK PM has met EU President J-C Juncker, to discuss possible progress in the Brexit negotiations ahead of the UK Parliamentary vote, later today. Theresa May is in Strasbourg, meeting Juncker/Barnier, where the latest news at the time of writing is that the UK Government has secured a “legally binding” backstop to the Irish border issue. Cable is all over the place, having just reached 1.3288 against the US$, after trading at 1.2960 in Asia on Monday. A vote still has to pass through Government and if it does then expect much higher levels for Sterling and risk assets. No deal and/or a negative vote, and it wont be pretty.
Apart from Sterling, which has posted a bullish key reversal day on the back of the Brexit headlines, the Jpy and Chf are under pressure, as safe-haven requirements diminish. At the same time, the commodity currencies are healthy , with the Aud and Kiwi both finishing Monday at session highs. The Euro is being dragged reluctanly higher on the back of activity in EurGbp and EurChf, and also a slightly softer US$.
The US$ is generally a mixed session, generally under some downside pressure despite the better than expected US Retail Sales. The headline figure rose 0.2% mm in January versus expectation of -0.1% mm, while the ex-auto sales jumped sharply by 0.9% mm versus expectation of 0.3% mm. On the other side of the coin, the December figure was revised down from -1.2% mm to -1.6% mm, with the ex-auto sales also revised down, from -1.8% mm to -2.1% mm.
Stocks are up a healthy 0.8 %( DJI)/1.4% (S+P)/2 %( NASDAQ), and this comes despite a 7% downturn in Boeing shares.
The metals are a little lower after having traded a tight range but weighed down by the solid Retail Sales, while WTI is up 1.3% on the back of remarks by an anonymous Saudi Arabian official that Saudi will extend the supply cuts it has been carrying out, into April.
Tuesday will be pretty active throughout the session, beginning the Asian day with a speech from the Fed chair, Powell. The main Asian activity will come from Australia which will see the January Home Loans, (exp 1.0%), the NAB Business Conditions/Confidence (exp+5/+3), while the China Foreign Direct Investment for Feb will also be released. Late in the Asian session the RBA’s Debelle wil be speaking at a public forum. The UK is going to be very busy, with the release of the Manufacturing/Industrial Production and the Goods Trade Balance but the real action will take place in the evening (early morning Wednesday for Asia), when the UK Parliament sit for their latest Brexit vote. This looks like being a dismal failure again and has the possibility of seeing Sterling take another dive although the expected result is already pretty much priced in. Finally, the US will have the February CPI (exp 0.2%mm, 1.6% yy; Ex F/E 0.2%/1.2%), the Food Price Index and a speech from the Fed’s Brainard. Have a good day.
Economic data highlights will include:
Tue: US Fed Chair Powell, Speech, Australian Home Loans, Investment Lending for Homes, NAB Business Conditions/Confidence China Foreign Direct Investment, RBA’s Debelle Speech, EcoFin Meeting, UK Manufacturing/Industrial Production, Goods Trade Balance, Industrial Production, US CPI, US NFIB Business Optimism Index, UK Parliamentary Brexit vote, API Weekly Crude Oil Stock Inventory
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