The latest Brexit vote – to block a “no-deal” Brexit under any circumstance – has been passed by just 4 votes (312/308), which has taken away that uncertainty and has allowed Cable to rally sharply, taking the other majors higher with it, at the expense of the US$. We now await the next vote, due tonight/tomorrow, to delay Brexit beyond the March 29 exit date. The US$ is lower on all fronts, with the DXY now trading at 96.52, and this has allowed the commodities to run to the topside with Gold +0.75%, Oil +2.75%, while stocks are up by 0.5%/0.75%. US yields are lower, with the US10Y currently at 2.60%. WTI’s strong rally, to a 2019 high, came about after the weekly EIA data, showing that crude inventories in the US are fast depleting. The Energy Information Administration reported that inventories fell by 3.86 million barrels in the week to March 8, versus forecasts for a stockpile build of 2.66 million, after reporting that inventories surged by 7.07 million barrels In the previous week. Cuts in Saudi exports, as well as tighter availability all round in oil provided by other members of OPEC are adding to the squeeze in supply and are underpinning the run higher.
In terms of data, also not helping the dollar, the US PPI rose by just 0.1% in February, the smallest annual increase in more than 1-1/2 years. This comes as the latest sign of benign inflation in the US and underpins the Fed’s wait-and-see approach to further rate hikes, later this year.
Thursday will once again be spent largely in disseminating the latest Brexit vote, ahead of the next one, tonight, to extend Article 50, and then to work out where we next go from here, so a choppy/ volatile but directionless day may be in store, for the FX sector at least.
The calendar otherwise becomes rather thin, as the session develops, although there are a few items of note on the calendar in Asia. The day begins with Australian Consumer Inflation Expectation, Japan Machinery Orders, China Retail Sales for February (exp 8.1%yy), Industrial Production (exp 5.5%tt) and Fixed Asset Investment (exp 6.0%yy). Europe will look to the German CPI for guidance (CPI, exp 0.5%mm, 1.6%yy; HICP, exp 0.5%mm, 1.7%yy), while the US will see the February Import/Export Index (exp 0.3%mm/0.1%mm) and the New Home Sales (exp -0.9%, 0.62 mio).
Economic data highlights will include:
Thur: Australian Consumer Inflation Expectation, Japan Machinery Orders, China Retail Sales, Industrial Production Fixed Asset Investment, German CPI/HICP, US Jobless Claims, Import/Export Index, New Home Sales.
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