The week ahead in GBP
The Brexit deadlines are another week closer and Theresa May is still struggling to find proper backing from the Commons. To say there is a division would be a massive understatement. Theresa May is still keen to give the impression that there is still time left to complete the Brexit separation on of before March 29th, although she has now hinted that any extension would be a “one-off” and could extend the discussions through to June. This has been partially backed by Juncker who feels that an extension would be “rational” given the complexity of Brexit. It’s important to remember that the EU are very keen to ensure that the negotiations are kept to a minimum, keeping March 29th as a hard line in the sand.
The biggest development to date is Labour’s stance on the referendum. Should the Tory Brexit deal face another defeat tomorrow, they will seek to back a new set of Brexit outcomes – a Leave option or Remain deal.
Whilst the pound continues to benefit from the positive chatter, bear in mind that any no-deal chatter, or possible new resignations, could still stall the rally. There are also politicians and members of the public who are actively pursuing a no-deal outcome – Jacob Rees-Mogg has been notably quiet of late!
The data calendar remains quiet for the UK and, unfortunately, we will be relying on the ever unreliable media broadcasts of Brexit progress.
The week ahead in USD
For anyone invested in the dollar, the big focus remains on the Fed and their direction for 2019. Jerome Powell testifies this afternoon but he is unlikely to provide any new snippets of information. It’s far to say that most of the FOMC members have been outspoken so far this year and, with Trump on their case every other day, they must feel the heat. If we compare the testament which was given in July last year, Mr Powell will likely face a barrage of questions on the slowing economy and political backdrop.
On Thursday we have US GDP to look forward to. This will focus on Q4 from 2018 with analysts from all over expecting the annualised result to drop by 1.1% from 3.4% to 2.3%.
There has been a lot of chatter surrounding the Government shutdown and the knock-on impact this will have on various businesses and sectors. For each week the government was shut, analysts expect 0.1% to be wiped off GDP. Whilst we won’t see this in the Q4 reading, it will manifest into the Q1 reading for 2019.
As I am writing this, Donald Trump has just touched down in Hanoi to meet with the North Korean leader. There are both significant political and economic gains to be had on both sides. To simplify, Trump is offering a scaled down military in exchange for secure relationships and a better economy.
The week ahead in EUR
Philip Lane, labelled one of the most influential policy makers, is confident that the ECB can cope with the current economic slowdown. There have been several questions raised over the current condition of the individual economics that make up the single block currency, and how the ECB can tie in inflation and interest rate targets.
German CPI is due out on Thursday and wider Eurozone CPI data will be released on Friday morning. Given the recent run of under-performance, the market remains net bearish on Euro growth.
The future Chief Economist of the ECB, the aforementioned Philip Lane, commented today that the current strategy is robust enough to take on any further downward revisions.
The week ahead in CNY
There is still a long way to go before any trade solution is found between the US and China, despite President Trump’s most recent Twitter activity. Any upside should be treated with caution as we’ve seen the same cycle play out several times with everyone slamming doors on each other.
The latest Trump-Kim summit will be watched closely by those in the surrounding geographical and economic area.
The week ahead in JPY
The JPY is likely to have a busy week as the major anti-risk currency. For all the reasons covered above, in particular the Fed activity, the yen will continue to find support throughout the markets.
Unemployment rates are due out towards the end of the week alongside their own CTP reading.
The week ahead in AUD
There is increasing correlation (after a short separation) between Chinese economic performance and the performance of the Aussie dollar. The recent rebound in Chinese Equities has offered a lifeline but overall it still lags far behind its G10 peers. The major focus remains on the RBA whether there is any further appetite for another rate cut or if they remain neutral for 2019.
The week ahead in SGD
Singapore’s factory output has posted the first contraction since December 2017 with partial blame on the US and Chinese trade tensions. The contraction printed 3.1% and was pinned mostly on the electronic and precision engineering sector.
In relative terms, it was the biggest drop since July 2016. Analysts are unsure whether this can rebound quickly given the lack of progress in resolving the trade dispute.
Have a great week.