Brexit or no Brexit, the vegan sausage roll saves the day!

Today's Highlights

• More Labour MPs could quit 

• Dollar and Yen trade tentatively higher on US-China talks

• Australian Dollar under pressure​​​​​​

 

Current Market Overview

UK bakery chain, Greggs, says it "has made an exceptionally strong start to 2019", helped by the launch of its vegan sausage roll. In the seven weeks to 16th February 2019, total sales for the North East-headquartered company grew by 14.1%, compared with 6.2%. Like-for-like sales (which strip out new shop openings) in company-managed shops increased by 9.6%, compared with 2.9% this time last year. This success story plays out against the backdrop of rebounding retail sales figures for January, which rose 1% from December 2018. However, with continued political uncertainty in the UK and no positive Brexit news to offer a helping hand, the Pound is weaker this morning, ahead of expected employment data.

More Labour MPs could quit 

Jeremy Corbyn has been warned that more MPs could leave Labour unless the UK’s opposition party listens to their concerns. Seven MPs have walked out in protest at the Labour leader's handling of anti-Semitism and Brexit.

One of the seven politicians to leave the part and start an independent group, Chuka Umunna, said "a lot of Labour MPs" could follow suit, together with Tories "demoralised by the UKIP-isation of their party".

Deputy Labour leader, Tom Watson, has warned his party could see more defections if it does not change.

Dollar and Yen trade tentatively higher on US-China talks

Across the Pond, the US Dollar is trading higher today after the public holiday. In Asia Pacific, the Japanese Yen is also trading generally higher today, as Asian markets send and receive mixed messages. There was a strong rally in Asian stocks yesterday, thanks to optimism about progress with US-China trade negotiations. However, this optimism has soon turned to caution. Another round of negotiations begin in Washington today, followed by a high-level meeting later in the week.

The White House confirmed in a statement that US-China trade negotiations will resume on Tuesday, today, in Washington. High-level talks begin on Thursday 21st February, led by US Trade Representative, Robert Lighthizer. Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, economic adviser, Larry Kudlow, and trade adviser, Peter Navarro, would also take part in the talks. Chinese Vice Premier Liu is also expected to join the meeting on Thursday and Friday too.

Markets generally expect the US Dollar to rise as talks pan out.

Australian Dollar under pressure

Staying in the Asia Pacific markets, the Australian and New Zealand Dollars are the weakest so far. The Australian Dollar is weaker as the latest minutes from the Reserve Bank of Australia (RBA) revealed significant concerns over the slump in the housing market. Economists are predicting that the RBA could keep monetary policy unchanged until 2021. Owing to concerns about economic conditions, some even expected an interest rate cut as the next move. The AUD could dip further – keep a close watch and contact your currency consultant if you have a requirement to buy or sell Australian Dollars now or in the near future.

No news good news for Euro?

The Euro is also tentative, with mixed messages across the markets and as the German economic sentiment results are awaited.

European Commission President Jean-Claude Juncker believed that US will refrain from imposing auto tariffs on EU cars for now. He told Stuttgarter Zeitung newspaper that “Trump has given me his word that there will be no car tariffs for the time being. I believe him.” But Juncker warned that “should he renege on that commitment, we will no longer feel bound by our commitments to buy more US soya and liquid gas. However, I would very much regret that”.

UK Brexit Minister Stephen Barclay said he had a “positive meeting” with EU chief Brexit negotiator Michel Barnier and UK Attorney General Geoffrey Cox. In the meeting, the proposed Malthouse Compromise regarding Irish backstop was discussed.

And, Cox shared his thinking in terms of the legal way forward and the ways to address the central issue. That is, according to Barclay, “the legal underpinning that is temporary and his advice to parliament in terms of the indefinite nature of the backstop”.

Swiss will release trade balance in European session while Eurozone will release current account. But main focuses will firstly be on UK job data, and then German ZEW economic sentiment. Later in the day, US will release NAHB housing market index.