It’s Judgement Day for Theresa May and the Pound

Daily Update - 15th January 2019

Yesterday’s Focus

• Euro Industrial Production

Yesterday’s Explained

The EU released November Industrial Production, down 1.7% MoM and 3.3% YoY showed slump in the market signaling that Inflationary levels in Euro Zone is widely affected more than doubling the market's forecast of a yearly decline of 1.4%. There were no figures coming from the US, as the partial government shutdown continues, with no light foreseeable at the end of the tunnel.

Today’s Focus

• UK Parliamentary Vote on Brexit
• ECB President Draghi’s Speech

Today’s Market

For the EUR, it’s a busy day ahead, with key stats scheduled for release through the day including 4thquarter GDP numbers out of France and Germany, finalized December inflation figures out of France and Spain and November trade data out of the Eurozone.While we can expect the EUR to react to the GDP numbers, direction through the day will ultimately be hinged on market risk appetite ahead of a scheduled ECB Draghi speech later in the day. With economic data out of China raising more red flags, any policy talk is likely to be EUR negative, though whether Draghi can rebalance policy divergence in favour of the Dollar remains to be seen.

For the Pound, it’s not quite the day of reckoning, with the Brexit record likely to play on for another week, but it’s one of the big days nonetheless.Parliament is scheduled to vote on Theresa May’s Brexit deal and, with the general view being that Parliament will shoot down the deal, even the British PM has noted that no Brexit was more likely than no deal and that’s a positive for the Pound.Expect some choppiness however, with Theresa May having 3-days to convince the Establishment to break protocol and give Britain terms that would deliver an exit that even the EU would prefer to block.

Across the Pond, it’s a busier day on the economic calendar, with key stats scheduled for release including December wholesale inflation figures and January’s NY Empire State Manufacturing Index.While we can expect December wholesale inflation numbers to have an impact on the Dollar, forecasts being Dollar negative, any bounce back in manufacturing sector activity will likely offset the negatives from wholesale inflation numbers that are widely anticipated.

On the policy front, FOMC members Kashkari, Kaplan and George are scheduled to speak, with Kashkari likely to have a lesser influence, being one of the more dovish members of FOMC.

To complicate matters further for the Greenback, the extended government shutdown and earnings will also play a hand through the day.