houses of parliaments

Tory backbench mutiny?

12th September 2018 Market Update

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🇬🇧 GBP – As expected, the unemployment rate remained at a record low of 4%. Average earnings increased by 2.6% year on year, which led to a further pick up in wages. This did not have a significant effect on the Pound, however it did allow it to maintain its recent positive momentum following the announcement that Carney would carry on as Bank of England Governor into 2020.

The main risk to Sterling in the short term appears to be domestic, as there are growing rumours of a Tory rebellion against the suggested Brexit deal. This could undermine May’s efforts to get her proposed Chequer’s deal through Parliament. Today there is no economic data of note from the UK.

🇪🇺 EUR – German ZEW economic sentiment came out with an improved figure yesterday, however this was still a negative reading. This had a minimal impact on the exchange rates though. As with Sterling, there is no significant data being released from the Eurozone today.

🇺🇸 USD – Today the US Dollar is the only major currency where data of relevance is being released. This is PPI and crude oil inventories. They are being released this afternoon at 1.30pm and 3.00pm respectively. Neither of the pieces of data are expected to cause significant market movement regardless of the readings though.

 

Key Announcements

🇺🇸 USD
13:30pm – PPI m/m
15:00pm – Crude Oil Inventories

 

Summary: The main short-term threat to Sterling appears to be a potential rebellion by Tory backbenchers, with as many as 80 expected to vote against the currently proposed Brexit deal. This appears to be the main threat to any Brexit deal being made, with positive signals from across the Channel.
 
In addition, yesterday average earnings were released from the UK above expectations at 2.6%. With unemployment remaining at a record low of 4%, this allowed Sterling to maintain its recent momentum.
 
The US is the only major economy where important data is being released today, with PPI and crude oil inventories being released this afternoon.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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