Prime Minister loses but Sterling gains

Today's Highlights

• Australian consumer confidence dives

• Eyes on USA this afternoon

 

Current Market Overview

If you want to get yourself on the telly, making wild predictions is a pretty reliable way to do it. So when we heard that, if Theresa May lost last night’s vote by more than 150, Sterling would fall 5%, oh, how we laughed. The markets had already priced in a loss for the government and anything else was merely a nuance. I guess, if she had won, there would have been a serious reaction but, in the end, her loss saw Sterling dip and spike, but the poor old Pound starts Wednesday half a cent higher than where it was at the start of Tuesday. That is true of the GBPEUR rate and the GBPUSD rate and there are similar gains against other currencies.

Keep calm and have a cup of tea

‘What next?’ is the pressing question. Downing Street has already said there is no plan to delay or rescind Article 50 and there is a no-confidence motion in the House of Commons tonight, which Mrs May will most likely win. Her colleagues don’t like her deal, but they don’t want an election, either, and the Democratic Unionist Party (DUP) may never have such a position of power ever again, so they will support the UK Prime Minister.

Other than this pesky EU problem, the UK is in reasonably good form, so Sterling ought to be much stronger. So any hint of a final deal will almost certainly further strengthen the Pound.

Aside from Brexit, the Pound has to navigate UK inflation data this morning. A small drop in the Consumer Price Index (CPI) measure is forecast to 2.1% from 2.3% previously. That adds to the pressure on the Bank of England (BoE) to leave the UK base rate well alone for now and that may weaken the Pound a little.

Meanwhile, Down Under…

There is other news, though, believe it or not. The Australian Dollar weakened on a very poor Consumer Confidence Index, released overnight. The Westpac Index came in at minus 4.7%, well below forecast and very concerning for the Reserve Bank of Australia (RBA). The RBA has no room to raise interest rates right now and may even have to look at a reduction in light of a slowdown in various areas of the Aussie economy.

New Zealand also published retail related data overnight and that showed credit card spending falling by 2.3% in the crucial month of December 2018. As a counterbalance, dairy prices rose and that is crucial to New Zealand’s export income. So the New Zealand Dollar was largely unaffected by the mixed data.

Eyes on USA this afternoon

This afternoon will focus on US retail sales data, import and export prices and factory orders. All are very interesting to the Federal Reserve, who will publish their Beige Book; a regional snapshot of the US economy that forms part of the next Federal open Market Committee (FOMC) interest rate setting meeting agenda.

Just when you thought it was safe to go back in the water…

So it is going to be another lively day. Incidentally, on this day in 1974, Peter Benchley’s book, ‘Jaws’ was published. The only link with this report is that I suspect Theresa May must hear that John Williams theme tune every time she walks into Parliament. Derrrr dum,  derrrr dum,   derrrr dum dum dum dum dum dum da da daaaa!