Good morning,

What you need to know in GBP

Hell Week is over and we are now left with little more than purgatory. With the Prime Minister’s ‘meaningful’ vote defeated a second time, as well as votes in favour of an extension to the Article 50 process and against a no-deal outcome, the Brexit options are severely curtailed.

It now stands that the UK has to either agree Theresa May’s deal, revoke Article 50 in its entirety or agree on a sizeable extension to the Article 50 process to give the Brexit can an almighty hoof down the road.

The next chance to vote on May’s deal will be tomorrow night and it still seems a stretch to suggest that it could gain a majority in the House of Commons with both Brexiteers and Labour in opposition to the PM’s plans for their own individual reasons. Should her plan not pass the Commons at the third attempt then Theresa May will go to the EU and ask for a long extension to the timeline before the UK leaves.

Sterling ended the week higher following the votes against a no-deal Brexit and both a long extension to the Article 50 process or agreement of the PM’s deal would be seen as a positive. Negatives to sterling would come from a short extension or the noise around a possible election increasing.

What you need to know in USD

As we noted in this morning’s update, the highlight of the economic calendar this week is Wednesday’s Federal Reserve meeting. There is a very small chance that interest rates are hiked this week in the US but almost not enough to warrant focus. Instead, we will be looking at the Fed’s comments on the domestic economy – which has remained strong in 2019 so far – and whether the ‘dot plot’ chart of Fed member interest rate expectations have shifted markedly in the past quarter. We would be very surprised if there was much more than one 25bps increase in rates ‘expected’ in the coming 18 months.

Any economic forecasts that show newfound weakness in the US are unlikely to materially damage the US dollar; there are many reasons to remain optimistic of the US economy and the dollar’s position as the global currency of choice given risks elsewhere.

What you need to know in EUR

This week will be the quietest week in the Eurozone for a while, and therefore catalysts to change the overall negativity around the Eurozone economy and its currency are thin on the ground. Risks from Brexit and the ongoing negotiations obviously represent a weakness for the euro as well as sterling.

What you need to know in CNY

News reports over the weekend that a US/China trade deal may take a little longer than had originally been expected is weighing on the yuan as this week begins. A meeting date of March 27th for Presidents Xi and Trump was pushed to April and now into June with the distance between the two parties blamed for the delays.

Chinese data has stabilised of late, which is good news for all concerned although improvement is still not something that we can count on at the moment.

What you need to know in JPY

In keeping with market expectations, the Bank of Japan held policy as is last week with Governor Kuroda noting in his post-decision press conference that both exports and industrial production are set to weight on growth in the coming quarters.

Risk flows from both Brexit and the ongoing uncertainty over the US/China trade plans will likely keep the JPY in favour.

What you need to know in AUD

Overnight tonight the Reserve Bank of Australia will release the minutes from its meeting at the beginning of the month at which it once again chose to keep interest rates at 1.5%. Economic data in Australia has been strong enough to maintain faith in the overall narrative that while the second half of 2018 was weaker than policymakers would have wanted, the growth fundamentals for this year look decent enough to maintain the belief that the next move in interest rates will be higher, not lower.

Thursday’s unemployment release should continue that expectation.

What you need to know in NZD

The NZD has the potential to move quite a bit this week with the upcoming GDP report more than able to give the Kiwi dollar a knock lower. We think that the NZD is overvalued at these levels and the value of expectations around future interest rate rises is too much.

The New Zealand GDP report is due this Thursday morning.

What you need to know in SGD

The USDSGD rate has remained within its well-established range of 1.3450 to 1.3600. We do not expect this range to be threatened any time soon.

Have a great week.