House of Commons support motion for another Brexit delay

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4 April 2019

thomasdodds

Sterling held firm around its strongest position in a week against the US Dollar on Wednesday after MPs voted narrowly in favour of forcing Theresa May to seek another delay to the UK’s departure from the European Union.

I
n a 313 to 312 vote, the House of Commons supported Yvette Cooper’s move that ensures May would be forced to ask for an extension to Article 50 beyond the current 12th April exit date. Moreover, the motion ensures that the length of the delay sought would be decided by parliament. This development, should it become law in the House of Lords later, is likely to prove good news for the Pound, given that it opens the door to a potentially lengthy extension to the Brexit deadline.

Investors also remain hopeful that eleventh hour cross party talks between Theresa May and Labour leader Jeremy Corbyn could break the currency Brexit impasse. The two leaders met for talks yesterday, although not enough progress has yet been made according to Corbyn. It is hoped that some form of common ground could be reached that would allow May’s withdrawal agreement to finally pass in a parliament vote before the European Parliament elections in May.

With Brexit continuing to dominate the newswires, currency markets are paying little attention to UK economic data. Yesterday’s services PMI, which suggested that the sector contracted in March for the first time since mid-2016, went almost completely under the radar.

Dismal German factory orders ramp up recession fears

The common currency hovered around its strongest position in a week against the US Dollar on Thursday morning, although some more negative news out of the German economy clouded the outlook for the Eurozone economy.

German factory orders sank by the most in more than two years in February, with weaker external demand likely to blame. Orders for goods declined by 4.2% month-on-month after investors had eyed a modest increase. This adds to a string of worse-than-expected economic news out of the country that has caused investors to ramp up bets that a Eurozone recession could be on the way.

In the US, macroeconomic news has remained pretty mixed ahead of Friday’s critical nonfarm payrolls number. Yesterday’s non-manufacturing PMI from ISM was a disappointment, although again largely overlooked by the FX market. The index came in at 56.1 after economists had pencilled in a reading of 58.0. While this adds to growing concerns of a drop off in US economic activity, the measure remains at a pretty healthy, enviable level compared to almost all of its major peers, particularly the Eurozone.