No deal least likely outcome?

Today's Highlights

• A pretty big Brexit deal nudge for ministers

• Keep an eye on the Pound

• Australian Dollar dips

Current Market Overview

Sterling has continued to move higher as markets still believe a “No Deal Brexit” is now the least likely outcome. The Pound rallied above 1.3000 yesterday as it emerged that The Prime Minister’s deal is being reconsidered by some of her most vociferous critics. Jacob Rees-Mogg has stated that he would prefer her deal over remaining in the EU and Boris Johnson hinted that he might be persuaded to change his mind if enough alterations were made and the UK renewed talks with the EU with conviction. Michele Barnier, the EU’s Chief Brexit negotiator, said yesterday that the UK had a choice between Mrs May’s deal or No deal and that unless a majority for an alternative agreement is formed then No deal would be the default position. So, a chaotic withdrawal cannot completely be ruled out, but the chances of a soft Brexit are increasing.  

A pretty big Brexit deal nudge for ministers

Airbus Chief Executive, Tom Enders, has warned that the company may move some of its operations out of the UK in the event of No deal, predicting sharp job losses on such an outcome. Airbus employs 14000 people in the UK and Enders insisted that he was not bluffing. This follows British stalwarts Dyson announcing a move of headquarters from the UK to the Netherlands, and Japanese big-hitters Sony are doing the same. This should focus minister’s minds and may put more pressure on them to find a compromise.

Keep an eye on the Pound

For now, the Pound is in the ascendancy, waiting for further confirmation. The next levels to watch are 1.32 versus the US Dollar and 1.1550 versus the Euro.

Australian Dollar dips

The Australian Dollar continued to decline overnight, despite an upbeat labour report. Employment data for December came in at 21,600 versus an expectation of only a 16,500 rise. The unemployment rate was reported at 5.0% beating expectations of 5.1%. Markets ignored the data and sold the Australian Dollar on expectations that the Reserve Bank of Australia (RBA) may be forced to cut interest rates in the near future to renew confidence and assist the cooling housing market.

Euro has potential to slide on economic risks

The European Central Bank (ECB) meets later this afternoon. There has been underlying weakness in the Eurozone and the single currency has been under pressure on growing speculation that the ECB will not be able to raise interest rates until late next year. Policymakers are likely to leave rates unchanged at today’s meeting, although any hint that there are further risks to the EU economy could see the Euro continue its slide lower.

Markets focus on Eurozone announcements and Brexit

The data calendar is light and the ECB meeting, followed by Mario Draghi’s press conference, will be the main focus today. However, Brexit will, of course, dominate the agenda as we head towards another vote next Tuesday.