Sterling was sold more in response to the slightly softer than expected inflation data than in response to the government's loss in the House of Lords, according to analysts at BBH.
Key Quotes
“As sterling reached its best level since the referendum this week, so was the vote the strongest pushback by the pro-EU camp. They defeated the government twice.”
“First, it succeeded in attaching an amendment to the Withdrawal Bill that requires remaining in the customs union, something Prime Minister May has explicitly ruled out. Second, the House of Lords passed a bill to prevent the government from changing the regulations governing employment, consumers, and the environment without parliament's consent. While the House of Commons can and most likely will swat away the House of Lords' initiatives, it gives a sense of what lies ahead as Brexit requires votes on at least three other crucial bills (trade, customs, implementation).”
“UK reported weak March retail sales. Headline sales fell 1.2% m/m, twice the expected 0.6% drop. This led the y/y rate to drop to 1.1% from 1.5% in February. Given the combination of weak data and negative political developments, sterling remains heavy.”
“Sterling recorded its low near $1.4175 before the House of Lords votes. This corresponds to the 50% retracement objective of the leg up that began from the brief dip below $1.40 on April 5. The next retracement objective and 20-day moving average are found in the $1.4125-$1.4145 area. Today, cable made a marginal new low near $1.4160 but has since stabilized.”
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