Good morning,
GBP: Pushing monthly highs
Theresa May’s plan B Brexit vote will take place on Tuesday 29th January, another date to scribble down in what has been a messy January so far.
YouGov released a new poll yesterday which showed support for remaining in the EU has increased: 56% now want to stay and 44% want to leave. Publicised polls like this will steadily increase the pressure on pro-EU politicians to consider using a second referendum as ammo.
We have UK retail sales due out at 09:30 this morning with forecasts signalling a sharp drop in spending during December. Both the High Streets and spending behaviour continue to be worries for many economists and the consensus for December is a print of -0.8%. Given November through to December signals the largest spending splurge for Christmas gifts this may cool off sterling’s bullish momentum.
I’ve spoken to lots of clients this week who’ve been slightly perplexed by how well the Pound has done. As Jeremy mentioned yesterday, not much has changed, but it’s worth noting that the markets tend to grind against the “retail” consensus.
Here are the key points that pushed the sterling higher:
- Politicians had made it very clear that the initial Brexit plan was not well supported. Once this was confirmed during the Commons vote, the market rallied higher.
- Theresa May wins the no-confidence vote called by Jeremy Corbyn, removing short term market risk that there is a seismic power shift as Corbyn replaces May. Sterling rallies higher again.
- The market is pricing in a possible extension in March giving everyone more time to structure the ‘right deal’. Sterling rallies higher again.
- The market is considering whether the UK will force the EU’s hand and enter re-negotiations behind closed doors to create a softer, more rounded Brexit Part II. Sterling pushes higher again on this sentiment.
USD: Government shutdown approaches one month
Some people don’t like going to work, so I can’t imagine that the workers who are forced into their roles, with no salary, are going to be particularly happy. TSA workers have said they are buckling under the pressure with many employees not turning up to work because of childcare and fuel costs – who can blame them? We are seeing this impact the wider economy and, even if a miracle deal can be reached, the damage may have already been done.
Steve Mnuchin stated that the US was edging closer to solving the US and China tariff war but without anything concrete, and the US Treasury denying any such claims, the market is still unsure how to behave. Danske Bank interpreted the developments as a wider sign that progress is definitely being made and a solution can’t be far away. The S&P500 closed up 0.8% and Crude Oil Prices followed at 61.60%.
Have a great day.