Global Themes

Brexit timeline gets shorter for May
- Political pain plights pound
- EUR/USD posts fresh 11-week high 
- GBP/EUR slips under €1.11
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Political pain plights pound
The run-up to the meaningful vote is dominating Sterling’s trading direction. Prime Minister Theresa May’s government was defeated yet again in a vote concerning the Brexit timetable. Ms May will now have just three days to update MPs on a plan B if she loses the crucial vote on her Brexit deal next Tuesday.

Sterling rose initially before investors began selling the unfavourably risky currency once again, ahead of next week’s vote. Although the chances of a no-deal are diminishing with recent developments, it is still a risk for Sterling and investors are wary. The turbulent scenes in Parliament yesterday are likely to continue as the five-day debate rumbles on, though right now, it seems Ms May does not have the support needed, which is weighing on the pound.

GBP/USD climbed to $1.28 yesterday, testing the 50-day moving average once again but quickly retraced back towards the mid $1.27, where we find ourselves this morning. This was predominantly driven by US Dollar weakness though, as investors sold the dollar after dovish remarks about a potential rate cut should global downside risks persist.


EUR/USD posts fresh 11-week high
The Euro stretched to multi-week highs against the US Dollar this morning, lifted by positive data and hoisted higher by the dollar selling bias. The US Federal Reserve’s (Fed) minutes published last night confirmed Fed Chair Jerome Powell’s recent change in tone. It appears the Fed will be more patient and future interest rate hikes will depend on economic data.

Although US data has been considered fairly strong of late, the concern over slowing global growth and financial market volatility appears to be unsettling policymakers. Fed member Raphael Bostic even remarked he was open to a rate cut should downside risks increase. The dollar has been sold-off modestly as a result.

EUR/USD is on track for its best week since September last year, rallying over 1.5% so far.


GBP/EUR slips under €1.11
Supported by unemployment dropping to a decade low sub 8% and boosted by the selling bias against the dollar, the Euro became a popular choice of currency for traders yesterday, dragging GBP/EUR back under €1.11.

After recession fears from Germany plagued markets earlier this week, the common currency welcomed a fresh wave of demand amid improved risk-sentiment conditions and a weaker dollar. Focus now shifts to today’s European Central Bank’s (ECB) minutes for further directional impetus. The ECB ended its bond-buying programme in December, four years since it announced the historic stimulus measure to support the Eurozone economy. However, amid global trade tensions and political turbulence, the minutes released at 12:30pm may tilt to the dovish side.

Although the Euro could weaken in such a scenario, upside gains for GBP/EUR will likely remain limited below €1.12 as Britain’s political uncertainty continues to soften demand for Sterling. 

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