GBP: Nothing new
Theresa May will return to the Commons later today to update the House on Brexit following her visit to Brussels last week. Her spokesman confirmed on Friday that the ‘meaningful vote’ on her Brexit plan would not take place this week but, then again, they said it was going ahead before pulling it a matter of hours before the vote was due. Trust in Downing Street communications is not high at the moment.
In our eyes, sterling is not about to start swinging about before Christmas. Markets are incredibly fatigued and only a dramatic change in circumstances – Labour calling a confidence vote, a wider shift in parliament for another referendum or a government call for additional no-deal planning – is likely to set much of a fire under them in the short term.
A Labour MP is tabling a motion today which “seeks to give the House of Commons an opportunity to register its view on each of the possible Brexit choices facing our country. This will test opinion to see if any way forward commands a majority amongst MPs.” MPs may get a second vote but it doesn’t look like the public will.
While we’re stuck in this political limbo, the economic data which previously had been underpinning some of the pound’s strength will come back into focus with Wednesday’s inflation and Thursday’s retail sales likely to continue to support sterling. How long the pound will be able to count on such support, however, is something that we have our doubts about as we head into the New Year.
EUR: Italy plan could be enough
Reports over the weekend suggesting that the Italian political leadership have come to an agreement on a new Budget plan have given the single currency a little positivity this morning. This decision comes only a few days before Italy was due to meet European Commission officials and possibly be subject to sanctions.
European inflation numbers are due this morning following Thursday’s European Central Bank meeting which saw a mixed inflation outlook and lower growth forecasts coming into 2019.
For now, Italy – and France to a lesser extent – is the key political story for the euro with Brexit a distinct third. Obviously the closer we get to the March 29th Article 50 deadline, that will change.
AUD: Watch tonight’s minutes
The Australian dollar has been the only real mover overnight in what has been an incredibly dull start to the week. We expect AUD to have another busy evening ahead of the publication of the minutes from this month’s Reserve Bank of Australia meeting. The RBA held its cash rate at 1.5% at its December policy meeting and we expect that the language around the next rate movement to confirm that it will be upwards as opposed to downwards.
Any accompanying notes on China or global trade will be interesting as well.
For now, have a great day.