Good morning,
Politics kept quiet for a day or two
March is turning out to be a rather slow month in currency markets which is making a rather pleasant change for those involved with it day in, day out. We do not anticipate this lasting too much longer – elections in Holland and the triggering of Article 50 will likely put paid to that – but their influence can wait one more day.
Political news continues to simmer away nicely but it is having less and less of an effect on the currency markets as nothing really has changed fundamentally in the past few weeks; Article 50 remains untriggered, the Dutch elections look like a 4/5 party fistfight, Macron and Le Pen are likely to slug it out in the 2nd round of the French elections and there is no new news on the Trump tax plan.
Until one of these political deadlines falls and shifts in a marked manner then we suspect that currencies are likely to remain pretty range bound.
Lords unable to buy sterling a gain
The House of Lords get one final swing at the Brexit bill today with the possibility that they will attach another amendment to the bill before handing it back to the Commons. As we spoke of yesterday, whether you think that the Lords are being obstructive or exercising their role for democratic oversight is neither here nor there; what it means to sterling is a few more days of a little bit more growth at current levels courtesy of our current trading relationships.
A Sky News report yesterday on prices in the UK rising at 3.3% instead of the 1.8% that the ONS’s CPI release may have had a slightly negative impulse on the pound. If correct, it would mean that wages are actually 0.6% lower year-on-year than prices and the post-Brexit squeeze on incomes has already begun.
Sterling this morning has fallen to a 7 week low vs the dollar.
Fillon hangs on
For the hype and rumour Alain Juppe is not running to become French President having declared so in a press conference yesterday. The Republican Party in France reiterated its backing for its candidate Francois Fillon who remains in 3rd place within the French opinion polls.
China still defending the yuan
The latest round of Chinese reserve data were announced this morning. Last month the numbers showed that China’s reserves of foreign currency had fallen below USD3trn for the first time since 2011. Defending a currency isn’t cheap and while the yuan has been quiet for most of 2017 it is because the People’s Bank of China has been keeping it quiet. Reserves at the central bank rose to 3.0051trn in February.
Expect the temperature on USD vs CNY to increase next week as trade delegation members from both countries meet at the G20 where currency is likely to be the top issue of discussion.
The data calendar is quiet.
Have a great day