1011 days of Brexit – April fools!
April 1, 2019
April fool’s day makes it difficult to filter reality and fiction in the media, especially when it comes to Brexit. But here’s what we know so far: April 12 is the new deadline, Parliament will have another series of indicative votes tonight and May will likely have another stab at getting her deal through this week. The clock continues to wind down and there are only 12 days left now for the UK to secure a deal or a longer extension to Article 50 in order to avoid a no-deal Brexit. This is due to Parliament rejecting May’s Withdrawal Treaty on Friday, thus ruling out a minor extension to May 22. Tonight’s second round of indicative votes may, therefore, hold the key to break the Brexit impasse, but if last weeks are anything to go by I wouldn’t hold your breath. Ken Clarke’s proposal to pursue a customs union with the EU remains the favourite in a multi-horse race after it lost out by a mere 8 votes last time around. Will the clock approaching zero prove enough to swing lawmakers into showing a majority for the option, or will May’s deal finally pull through on the threat of a softer Brexit? Time will only tell.
The euro didn’t move much from the centre of the G10 currency board on Friday after a day on which further Brexit rumblings kept everybody’s attention captive. The Markit Final Manufacturing Purchasing Manager Index that came out this morning confirmed the troughs the sector is currently going through, as it hit its worst reading in almost 6 years. Output change – usually a good measure for economic activity – sank from 49.4 to 47.2, indicating risks to the Industrial Production in Europe continue to be tilted to the downside. Today’s Flash Consumer Price Index Reading at 9:00 BST will already be the most important data release for the block this week, with Germany’s Industrial Production figures on Friday being the less boomingly sounding final chord.
The US dollar starts the week on the back foot this morning after Chinese and Russian manufacturing PMIs surprise to the upside, soothing investors growth slowdown woes. US-China trade talks continue this week with Beijing trade negotiator, Liu He, arriving in Washington on Wednesday. There is still no end in sight for the US-China tariffs with Trump’s economic advisor, Larry Kudlow, stating that talks could stretch on for months. Bloomberg measures the share of US GDP susceptible to trade risk at 1.5%. With trade accounting for a substantial part of US GDP, the slowing global economy may be the best catalyst to wrap up talks between the two economic superpowers. On the US data calendar, Retail Sales are released at 13:30 BST today, with Durable Goods Orders released on Tuesday and the always vital US labour market data released on Friday.
The loonie enjoyed a big boost from better than expected Gross Domestic Product data on Friday, immediately reaching a fresh high for the week against USD on the release. GDP grew 0.3% in January, erasing the last two months of declines – and highlighting the risks of paying too much attention to volatile monthly data. Of the 18 forecasts submitted to Bloomberg for the release, 17 were below 0.3%, illustrating the extent to which the release came as a surprise. The sector breakdown of the figures showed the increase was broad-based across construction, consumption and business investment, but resources remained in contraction. Today at 13:30 BST the Manufacturing Purchasing Managers Index will be released.