Sterling falters as MP vote fails to break Brexit deadlock

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28 March 2019


An end to the current impasse over Brexit continued to look a long way off yesterday.

he so-called ‘indicative votes’ held in parliament on Wednesday evening, which were hoped could yield a majority in favour of an alternative to May’s Brexit deal, in the end proved fairly futile. All eight of the alternatives that were put forward were rejected. The proposal to create a customs union that would ensure a closer trading relationship with the EU than May’s deal was the closest to passing, with the motion for a second referendum defeated in a 295 to 268 vote.

The lack of a clear way forward and no signs of common ground within the House of Commons proved bad news for the Pound, which fell by around three-quarters of a percent yesterday evening. Sterling has been pretty directionless in the past week, torn one way and then the next as contrasting headlines regarding Brexit hit the newswires.

Theresa May now looks set to make one final attempt to force her deal through parliament, possibly on Friday. Her pledge to step down as Prime Minister should the deal pass has, it seems, brought some senior Brexiteers onside, raising faint hopes that her deal could be accepted. That being said, without the support of the DUP and the ERG her deal remains very likely to be shot down. A long extension to the Brexit deadline remains the most likely solution, in our view.

US Dollar gains as major central banks turn dovish

The critical EUR/USD cross continued to edge lower on Wednesday, with the US Dollar supported by a generally dovish set of communications from a number of major central banks.

Some of the world’s major central banks have flagged risks over global growth in recent weeks, with the Reserve Bank of New Zealand the latest in a pretty long line of monetary authorities to strike a dovish tone and suggest that its next move in rates could be down. This has caused investors to sell those currencies more dependent on external demand and buy those more resilient to weaker global growth, the US Dollar being one of those.

Today will see a number of pretty significant data releases from both sides of the Atlantic. This morning’s consumer and business sentiment data out of the Eurozone will be followed by this afternoon’s German inflation numbers for March.

Of more significance will be the revised US Q4 GDP numbers, set for release at 12:30 GMT. This critical data release is expected to show that growth in the world’s largest economy slowed to 2.4% annualised in the final three months of the year, down from the 2.6% initial estimate.