The U.S. Dollar sustained most of its gains against its counterparts save the British Pound, which improved by over half a percent overnight.
Yesterday’s afternoon was an exciting one that witnessed the survival of Theresa May as U.K. Prime Minister and Brexit deal-making going into a new phase. The prospects of a resolution to the built-up uncertainty that has gone on for over two years is what is setting bets on Sterling appreciation.
Housing Starts data was not released because of the shutdown, but there was positivity on the side of Philadelphia Fed Business Outlook, almost twice as optimistic as expected when surveying business leaders. This is a change from recent revelations of pessimism among small business owners per the January National Federation of Independent Business (NFIB) survey that swathe steepest decline in confidence in fourteen months. We think the greenback has room for losses as the economy may lose some momentum, but inconsistency in indicators, or lack thereof, will keep the FX market all over the place primarily monitoring statements and other headlines.
What to Watch Today…
- •No major events scheduled for today.
The Euro keeps fluctuating within a half percent range, making it difficult to predict throughout the week. Mostly affected by the dovish commentary from European Central Bank President Mario Draghi, the shared currency is staying afloat on data at least meeting expectations.
Consumer Price Index (CPI) for the Euro-zone registered at 1.0% as forecast and the yearly average is currently making headway towards the desirable 2.0% at 1.6%. Britain leaving the European pact could surge prices overall in Europe since protections and other dynamics changing could easily force businesses to demand more in a less free-trade environment.
The Pound keeps improving as the gridlock in working towards a solution to Brexit seems to be turning a page. They certainly were not singing “Kumbaya My Lord” together in Parliament, but during yesterday’s havoc as debate over a confidence vote went on showed the desperation by lawmakers to work towards something and the fear of a no-deal for the country. Theresa May suffered the biggest loss a government has ever faced in front of a legislative chamber as the deal she worked on for over two years with the European Union was defeated, but showed similar resilience as Sterling when she kept her job by a thin margin.
Now, her cabinet may see people go and she wants Labour Party figures to come to her side in what she deems a national emergency. France and Germany are said to have softened their stance on not allowing for further delay to the deadline, but reports are on the side of Britain catching a break. After 2-plus years of nothing but frustration, it seems like the appropriate approach. We think a second referendum is what will ultimately come off all of this.