Good morning,

GBP: Deal looking more possible than ever

The mood music around sterling today is a lot more positive than it was 24 hours ago. The news that Theresa May will be bringing legally binding changes to the Withdrawal Agreement back to the UK parliament to be voted on later today. MPs this morning are complaining that they have not been able to review these changes as yet but we look set for a meaningful vote on the plan tonight.

We have to remind you that the last time around the Prime Minister’s plan lost by a record amount, going down by 432 to 202. It therefore┬ástands that Theresa May needs to change the minds of 116 MPs for this vote to succeed; that would mean winning the backing of all ten DUP members, the four independents who have backed Brexit in the past, plus at least 65-70 of the European Research Group of Brexiteers and 40-45 Labour MPs. This is a tall order for any Prime Minister.

Cabinet will meet at around 9.30am with the legal advice of the Attorney General likely to be published shortly after that. Theresa May will open the debate at about 1pm with voting on the plan beginning at 7pm, although we will have to wait until lunchtime to see just how many amendments will be voted upon first.

As we made clear in our webinar yesterday, agreement of a deal is the most positive outcome for the pound and we could see a run in the coming days towards the 1.42 mark in GBPUSD and towards 1.20 in GBPEUR; the doubt then emerges about how sustainable these gains could be in the longer term. Given the exuberance this morning, a defeat could see a slump back to 1.30 and 1.16 respectively.

A recording of our webinar, including our expectations of what will happen in the coming days and the likely reaction in sterling to all outcomes is available here.

AUD: Poor business confidence undermines dollar

Away from Brexit news, markets are really quite quiet. The Aussie dollar started the Asian session on the back foot following a poor business confidence figure for February. The readings of both current conditions and confidence for the future missed expectations with the latter falling to its lowest level since January 2016.

The hopes on Brexit and a wider swell in risk appetite have driven a rebound in the AUD and other trade-related currencies but poor local data will be enough to keep the AUD under pressure.

CNH: Trade talks schedules to be announced soon

The Xinhua News Agency is reporting this morning that China’s Vice Premier Liu He and his American counterparts have decided on arrangements for the next stage of trade talks overnight. While no details of when or where have so far been announced, we expect that the focus will remain on enforcement of intellectual property rights and standards and Chinese purchases of US goods.

We would be surprised if the date for the next round of talks is not announced by the end of the month, a move that could further support the yuan and other trade-focused currencies.

Have a great day.