Good morning,

GDP: Delay and pray

Sterling ripped higher yesterday as the government finally caved and agreed to allow parliamentarians to have a vote on both avoiding a no-deal Brexit and a delay to the end of the Article 50 process.

Prime Minister May set out the new Brexit sequencing in front of MPs yesterday. Firstly, we will have a vote on her deal on Tuesday March 12, if that is defeated – as it likely will be – then there will be a vote on eliminating a no-deal on Wednesday March 13th and a vote on a ‘short delay’ on the 14th.

Needless to say, that is going to be a hell of a week.

A delay, as PM Theresa May has been at pains to emphasise, doesn’t negate the chance of the UK leaving the EU without a no-deal, instead it changes the date by which a deal needs to be sought.

Sterling’s performance is natural in such a circumstance, eliminating a no-deal Brexit earlier on in the negotiation process would probably have seen GBP sit at these levels more readily for longer and further gains for sterling are available, as are losses if the political situation falls apart once again.

Gains will come on the news of a deal, a change in language on a possibility of the UK joining some form of customs union with the European Union or further calls for a second referendum on the UK’s path out of the European Union. Losses would come from votes to rule out a no-deal or not to rule it out, but also to extend Article 50.

USD: Housing data concern but confidence rebounds

Yesterday, home prices across 20 major cities showed their slowest growth for four years. Affordability remains a key issue for the consumer market, who have been hurt by whipsawing stock markets and wider uncertainty stemming from the government shutdown and the very public trade tensions.

Jerome Powell’s comments yesterday were in line with the typical framework we would come to expect. He confirmed that the FED is in no rush to make a judgement on further interest action at this point in time, sighting that they haven’t had time to read into 2019 data.

US stocks and the Dollar remained steady into the evening trading, with focus back onto the Trump Kim summit in Hanoi. This summit has already been dubbed a disappointment by several analysts, who aren’t expecting anything tangible, aside from a series of aggressive handshakes.

Elsewhere, the US Conference Board consumer confidence index beat expectations, coming in at 131.4 (vs 124.9 consensuses) for February. This seems to be largely driven by a sharp rebound in consumer expectations, helped by a 19% increase in the value of the S&P 500 since the losses suffered in December.

JPY: India/Pakistan tensions keep havens bid

The risk atmosphere is most definitely mixed this morning with the positive news out of the UK on Brexit balanced by news of further conflict between India and Pakistan ending with the latter downing two Indian jets overnight. JPY and the CHF have pulled slightly higher alongside the USD on these tensions.

Have a great day