Good morning,

GBP: Votes but not meaningful ones

Sterling had a volatile day yesterday although the moves did not come courtesy of Brexit or yesterday’s inflation data. Sterling spiked just before noon on a large order flow but has since settled down as uncertainty over the outcome of tonight’s Brexit vote weighs down.

Tonight’s votes are non-binding – the government does not have to pay attention to them – but another defeat on Brexit, possibly including a rebellion of pro-Brexit Conservative MPs over plans to rule-out a no-deal, would show just how little room the PM has to manoeuvre in talks with Brussels.

Debate on Brexit is slated to finish at 5pm – alas just for today, not forever – so we would expect the votes on these non-binding motions to take place around then.

Yesterday’s inflation figure was a bit of a non-event although the rate of price increases fell to their lowest level in two years. Brexit preparedness is far more important to the central bank at the moment and as long as inflation remains in and around the Bank’s target of 2%, focus can be felt elsewhere.

Some negativity may also be being felt from a further fall in house price data overnight. The Royal Institute of Chartered Surveyors’ latest survey of house prices fell to -22, the lowest since July 2012.

CNH: Trade surprises

Chinese trade data came in better than forecast in January and has subsequently allowed the Chinese yuan and other trade-focused currencies to drive higher through the Asian session. Exports rose 9.1% from a year ago, defying a forecasted 3.2% contraction with imports falling by 1.5% over the same period, far better than the 10% decline that was expected.

News overnight from the States on trade will have also helped the yuan. Bloomberg is reporting this morning that President Trump is open to a 60 day extension to the current truce on additional trade tariffs that is due to expire on March 1st.

This would confirm our expectations that, while a deal may not be forthcoming any time soon, both parties seem to be fairly apart on issues such as intellectual property protection provisions and therefore an extension saves face for both parties.

EUR: Germany squeezes blood out of a stone

The single currency has not really reacted this much to the news that the German economy has managed to avoid a recession in Q4 by the slimmest of margins. The preliminary reading of Q4 growth in the largest Eurozone economy registered an increase in output of 0.02%.

Germany’s car manufacturing industry slumped in Q3 and has been slow to recover in Q4 – a by-product of changes to emissions standards and, while that will take some time to roll out of the numbers, the service sector should be able to guard against future recessionary fears.

Have a great day.