14th February 2019 Market Update
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🇬🇧 GBP – The Brexit focus returns to Westminster today with MP’s convening for another days debate on everyone’s favourite subject. While the absence of a “Meaningful vote” has diminished the days importance somewhat MP’s will have the chance to air their views and table amendments to influence the governments accountability. PM May could also face a showdown with her pro-Brexiteers as the so called Brady amendment, which calls for legally binding changes to the NI backstop, also includes a clause whereby MP’s will be supporting a call for the UK not to leave without a deal. While this would appease large sections of the house the Conservative ERG group have already expressed outrage with many threatening to vote against or abstain. Labour’s Yvette Cooper is also likely to table her amendment to extend the 29th March exit date should no deal be forthcoming by mid-March again. Labour have already expressed their support for the plan and, given the elapsed time since its first presentation, this amendment is more likely to pass this time.
UK Inflation printed at 1.8% for January pretty much as expected and confirmed a fairly benign inflationary environment. Sterling reacted with indifference though any perceived BOE rates pressure eased as markets moved expectations of a 2019 UK rate hike down a notch to 30% from 40%.
🇺🇸 USD – In contrast, US inflation rose by 2.20% year on year and as such could put interest rates back on the agenda in the US. The dollar rose as a result.
With US-China talks seemingly heading for some sort of accord President Trump continues to make conciliatory noises with reports that the existing deadline could be pushed out by as much as 60 days. Negotiations continue today with Treasury secretary Mnuchin, who leading the US delegation, optimistic that more progress can be made.
🇪🇺 EUR – The extent of the slowdown in Germany was demonstrated by figures showing Germany reported 0% growth in the fourth quarter of 2018 as the influential German IFO think tank yesterday urged the EU to make concessions to the UK. Businesses are “already suffering” and the IFO predicted a hard Brexit could see German growth could be 0.2-0.5% lower longer term. Elsewhere in Europe Spain’s Socialist coalition government is said to be close to calling a snap election after their 2019 budget was rejected by the Spanish parliament.
GBP: Inflation falls further.
USD: Inflation rises inciting talks of further rate hikes.
EUR: Germany in trouble with growth at 0%.
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