Global Themes

Steady Sterling shrugs off Brexit vote block
View our Brexit Scenario Guide here.

- Third “meaningful vote” blocked
- UK jobs report due
- German ZEW in focus


Third “meaningful vote” blocked
Prime Minister Theresa May will not be able to put her Brexit deal to a third parliamentary vote unless it’s substantially altered from the previous one. Sterling fell around half-a-cent across the board yesterday as the House of Commons speaker, John Bercow, issued a statement confirming this ruling. However, the pound has since recovered as market participants appear to believe a long extension and softer Brexit is still the more likely outcome.

A 400-year old parliamentary ruling states that substantially similar proposals cannot be voted on more than once during the same session of Parliament, which ends in July this year. The UK is set to leave the European Union (EU) a week on Friday, but PM May is now expected to request a lengthy extension of Article 50 and so delay the exit and avoid a potentially chaotic no-deal scenario unfolding. The EU summit on Thursday and Friday should confirm whether the EU will grant the extension as expected.

Sterling volatility persists as traders continue to digest Brexit-related news flow. GBP/USD is currently trading just shy of $1.33 and GBP/EUR lingers below €1.17. Sterling may be able to recapture both these key levels today if UK jobs data impresses.

UK Jobs

UK jobs report due
At 9:30am today, UK jobs data will be published and could trigger more Sterling volatility in the short-term. Labour market conditions have been improving over recent months, but average earnings are forecast to have slowed to 3.2% in January from 3.4% in December. Should Sterling manage to climb higher today, it might be a struggle to hold on to key levels and traders may take profit on any uplift, which would cause Sterling to drop lower after a pop higher.

The unemployment rate is expected to remain at its multi-decade low of 4% and despite wages decelerating, the overall report should still be encouraging for the Bank of England (BOE), which may look to raise interest rates to curb rising inflation that is expected to arise from rising salaries. A rate hike by the BOE will likely be put on hold because of the ongoing Brexit saga though. Any movements in the pound as a result of this morning’s data may be short-lived as its value hinges primarily on Brexit rumours and developments.

The reactions in the pound might be useful in exposing the bias in GBP currency pairs though. For example, should Sterling ignore better than expected data, then there probably exists a downside Sterling bias in the market, which could punish the pound heavily if any negative Brexit news emerges.

German ZEW

German ZEW in focus
The focus from Europe this morning is the German ZEW surveys which drop in at 10:00am. Growth concerns in Europe continue to persist and the Euro has struggled to make any significant gains as a result. The European Central Bank (ECB) issued a more cautious monetary policy statement earlier this month, highlighting more accommodative measures will be needed to support the economy.

Germany, the Eurozone’s powerhouse, will be under the spotlight this morning as the ZEW economic sentiment survey for March is forecast at -11.0 from -13.4 in February. The current conditions ZEW survey is expected at 11.7 from 15.0. A mixed bag of data results today could prevent any fresh directional impetus for the Euro but if the data surprises to the upside, EUR/USD could make a charge for the $1.14 handle.

EUR/USD has risen for seven out of the last eight trading days but continues to bump into resistance at the 50 and 100-day moving averages in and around the $1.1360 zone. A trend reversal may occur if the Euro fails to break through this key barrier.

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