Investor eye Brexit bill amendments, Carney to speak today

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21 February 2017

Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The Pound enjoyed one of its best day since the start of February on Monday, although retraced much of its gains this morning, as the House of Lords began its debate on the government’s Brexit bill.

I
nvestors have begun betting on a slightly more protracted period of discussions in the House of Lord’s this week on a bill that permits PM Theresa May to trigger formal exit talks with the EU. A number of opposition party and crossbench Lords’ members are seeking amendments to the bill, largely in the form of guarantees for the rights of EU citizens living in Britain.

The Euro remained fairly range bound yesterday, despite developments over in France during the weekend that put National Front leader Marine Le Pen marginally ahead in the race to become the next President at this May’s election. Independent front-runner Emmanuel Macron has come under heavy fire for his comments claiming that French colonialism was a “crime against humanity” during a trip to Algeria. Polls for the second round of voting have shown Macron’s lead over Le Pen has halved in less than two weeks, with prediction website Predictit now putting her as slight favourite at 40% to 35%.

Economic and political news was light on the ground in the US yesterday due to a national holiday in mark of President’s Day. The US Dollar index was therefore largely range bound throughout trading.

Investors will now await this afternoon’s manufacturing and services PMI’s in the US, both of which are expected to show a modest increase. In the Eurozone, the latest composite PMI should provide a key test to our view that the economy in the Euro-area is recovering better than expected. Governor of the Bank of England Mark Carney is also scheduled to speak at parliament this morning along with a handful of fellow central bank members.

Major currencies in detail

GBP

Sterling rose by 0.3% against the US Dollar as markets opened for the week on Monday, with investors wary of prolonged discussions at the House of Lords.

Economic data released yesterday was mostly second tier and the Pound was little moved off the back of the news. House prices by Rightmove did, however, show that activity in the UK housing market picked up pace at the beginning of the year. House prices rose 2% in January according to the measure, marking its largest monthly jump in a year.

Mark Carney and other BoE’s members will be the main event in the UK today when they speak in Parliament this morning. Investors will be looking for clues as to the chances of a sooner-than-expected interest rate hike by the Bank of England in the coming months.

EUR

The single currency traded within a tight range on Monday, although slumped 0.4% during Asian trading overnight against the Dollar as investors awaited economic and political news later in the week.

Consumer confidence in the Eurozone fell unexpectedly this month according to the preliminary index from the European Commission released yesterday. The index slumped to -6.2 from -4.8 with consumers faced with an uncertain political period ahead of key elections in the Netherlands and France in the coming months.

The latest business activity PMI’s will be released this morning. A significant negative surprise in the index could be enough to force the Euro below its recent range against the US Dollar.

USD

With announcements limited due to the national holiday, the US Dollar ended London trading unchanged against its major peers yesterday. Spurred on by higher US Treasury Yields, the Dollar rose 0.4% this morning.

FOMC members John Williams, Neel Kashkari and Patrick Harker will all be speaking in the US this afternoon. Recent communications from Federal Reserve members have been on the whole relatively hawkish, and we expect more of the same as policymakers in the US prepare the market for a third post-financial crisis interest rate hike in the country at the coming meetings.

The aforementioned manufacturing and services PMI’s will also both be released at 14:45 UK time.