Chinese economic concerns send ripple effects across currencies

Today's Highlights

• Surprise boost for Sterling on no Brexit reports

• Is an extension inevitable?

• All eyes on UK

Current Market Overview

The US Dollar rose versus the Australian and New Zealand Dollars, which are important gauges for global risk appetites, as investor sentiment was hurt by trade data, increasing concerns China could have a sharp economic slowdown. Broader market sentiment turned negative after data showed that China’s December exports unexpectedly fell 4.4 percent from a year earlier, the biggest monthly drop in two years, pointing to further weakening in the world’s second-largest economy. China posted a set of very disappointing trade data today. Exports and imports posted the biggest contraction since 2016. More importantly, imports from the US dropped a massive -35.8% year-on-year in the month. But for the year, trade surplus with the US hit a record high.

Surprise boost for Sterling on no Brexit reports

Sterling jumped on Friday, on growing expectations that Britain will seek to delay leaving the European Union. A denial by Prime Minister Theresa May’s spokeswoman of a newspaper report knocked the Pound off its highs, but it remained up on the day, with analysts citing a growing sense among some investors that Britain will not be leaving the EU on 29th March. Two of the biggest donors to the Brexit campaign told Reuters they now believe the project they championed will eventually be abandoned by the government, underlining the uncertainty about what will happen after 29th March, Britain’s scheduled departure date.

Is an extension inevitable?

Commentators seem to be in agreement that the vote is not likely go through on Tuesday – the question is, whether a general election or a second referendum would follow. We believe that a second referendum is more likely. But even so, it could be in a binary form, May’s deal, or Remain. Or it could include no deal Brexit as an option. In most cases, an extension of Article 50 looks inevitable. Is an extension inevitable?

All eyes on UK

Economic data this morning comes in the form of the UK Consumer Prices Index (CPI) and Retail Sales and European Industrial Production. The focus will, of course, remain on the UK, with markets concentrating on any Brexit developments. Keep a close eye on the Pound.