Brexit and a Vote of No Confidence Keep the GBP Front and Center

Daily Update - 16th January 2019

Yesterday’s Focus

• GBP UK Parliamentary Vote on Brexit
• EUR ECB President Draghi’s speech

Yesterday’s Explained

The Euro declined against dollar around 0.72% after data showed, Germany's economy slowed in 2018. Europe's largest economy slowed to 1.5 percent in 2018, the German government reported. It is the weakest rate in five years and markedly slower than the previous year, in a sign that exporters in Europe's largest economy are being hit by trade tensions.

The pair resumed its decline after ECB's head Draghi gave testimony on monetary policy, saying that recent economic developments have been weaker than expected, adding that a significant amount of monetary stimulus sill needed and pushing the pair low

Sterling rebounded strongly against dollar yesterday around 0.4% after British lawmakers defeated Prime Minister Theresa May's Brexit divorce deal by a crushing margin. Parliament voted 432-202 against May's deal, the worst parliamentary defeat for a government in recent British history..

It may have increased the chance of second referendum but also the chance of No- Deal Brexit both tails are now fatter for GBP volatility, but there is also a “very high” chance that Brexit will be delayed past March 29.

 

Today’s Focus

• GBP Consumer Price Index
• EUR Harmonized Index of Consumer Price
• GBP BOE Governor Carney's Speech

Today’s Market

On Wednesday, for the EUR, it’s a quiet day ahead, with key stats limited to finalized inflation numbers out of Germany and Italy, which are unlikely to have a material impact on the EUR.

For the Pound, it was a shocker for the British PM on Tuesday, with 432 votes going against the Theresa May Brexit deal, only 202 in favour. The vote against not only reflects sentiment towards Brexit, but also towards the British PM. Opposition party leader Corbyn wasted no time in slating a vote of no confidence, which will take place this evening.On the data front, economic data scheduled for release includes December inflation figures, which will likely be brushed aside, the markets focused on Parliament. BoE Governor Carney may garner some attention in the early part of the day, but even Carney is unlikely to be able to calm the markets through the day.

Across the Pond, economic data scheduled for release includes December retail sales and import and export price figures, with retail sales figures being the key driver through the day. FOMC Members across the board have shifted on the policy front to leave the Dollar on the defensive. Positive numbers could give the Dollar a boost, though may need to be impressive to have a long lasting impact, the Oval Office and the extended government shutdown also there to consider.