Good morning,

GBP: Meet the new plan, same as the old plan

As we joked last week, Theresa May’s Plan B on Brexit following her defeat on the ‘meaningful vote’ last week is the same as her Plan A. Nothing has changed and by the time the Commons defeat this motion in week’s time we will simply be two weeks closer to the Article 50 deadline of March 29th. Brexit has become an Escher painting.

Opposition parties have tabled another armful of amendments – notably one to force the government to extend Article 50 if a deal is not agreed before March 29th – and another that lists two options of either a customs union or a public vote – a second referendum in all but name – on the deal that has been put forward by the House of Commons.

Confused? We will be running through the options and expectations of these votes and the impact on sterling in our next Brexit webinar next Tuesday afternoon at 2pm. Attendance is free and the presentation will be recorded for those unable to make the 2pm start time. Just register here.

While the votes on the deal will take place on Tuesday, there is also the prospect of another confidence vote in the government.

Sterling may be a little more concerned with the news from the UK jobs market this morning with employment and wage numbers due at 09:30. Employment in itself is a lagging indicator – it is slow to react to changes in the economic cycle – so although these numbers are ostensibly what happened in November, they are more a representation of what happened in the summer. The summer was a good time for the UK economy and so wage and jobs numbers today will likely remain strong.

We also expect wages and employment to run higher post-Brexit as well as businesses are forced to continue hiring to make up for shortfalls in migrant labour.

USD: Blue Monday

The dollar is a little stronger this morning against most currencies, notably except the JPY, as traders enter Tuesday a little more reticent to commit to risky investments. Fading optimism or a simple lack of new news on US/China trade talks is a contributing factor alongside yesterday’s poor economic news from Asia and the continuation of the government shutdown in the States.

Similarly, news that the International Monetary Fund has cut its growth forecast for the global economy added to the slightly morose feeling that befitted a day called “Blue Monday”.

Existing home sales from the US are due this afternoon and will act as a fresh indicator of consumer confidence following last week’s slip to a two year low.

EUR: Confidence trick

Confidence is also the name of the game in Europe with the German ZEW number due at 10am. A survey of economists on the state and strength of the German economy, the ZEW is expected to slip for the fourth month in a row following poor growth and industrial production numbers in the country throughout Q4.

The euro remains below the 1.14 level against the USD this morning.

Have a great day.