Another long night in Westminster
March 27, 2019
At around 19:00 GMT today, MPs will begin to vote on a series of indicative votes to break the Brexit impasse after lawmakers take control of the Commons business paper, with the results expected at around 21:00 GMT. Finding a majority consensus on how to leave the EU has been the bane of May’s premiership, and it looks like yesterday’s move by the ERG to support her deal was too little too late. Currently, there are 16 possible votes on the table for this evening but one would imagine house speaker Bercow will whittle this down to below ten at some point mid-afternoon. Scenarios such as Jeremy Corbyn’s customs union with alignment on EU rights and regulations and Nick Boles’ common market 2.0 will be under severe scrutiny as they are the likeliest options to strike a consensus. Should May’s deal be put forward for voting, with the latest ERG move, all eyes will be on the DUP’s stance and if the deal commands a majority when it is not legally binding. That would be quite the embarrassment. However, curveballs exist in the case of a second referendum and revocation of article 50, with the unlikely “managed” no-deal up for proposal too. Meanwhile, in the political hullabaloo, May is thought to set out plans to the backbench 1922 committee at 17:00 GMT for her resignation later on in the year. Uncertainty over whether conservative MPs will have a free vote tonight is also apparent. Should a majority around a softer Brexit scenario be struck, or even the cancellation of Brexit, sterling will likely strengthen up above the 1.34 level against the US dollar. Oh, and if that’s not enough, PM questions are also at lunchtime today.
The prospect of a euro rally after Friday’s dismal survey data seemed far away yesterday, as the single currency plumbed fresh two weeks lows against USD. The GfK Consumer Climate survey was released for Germany, showing a slight erosion in the optimism index, which at 10.4 was the joint lowest reading since April of 2017. This morning’s data included a higher than expected reading for French Producer prices, which rose 0.4% in February vs a consensus forecast of 0.1%. The results of the ECB’s latest Targeted Long Term Refinancing operations will be released at 10:30 GMT. Soon after at 10:35 Investors will bid for the privilege of paying the German Government to hold their money in an auction for fresh 10 year bunds.
The greenback softened yesterday as global risk appetite began to improve gradually, while fixed income markets pared back some of the extreme dovish pricing of Fed policy that had taken place on Friday and Monday. Federal Funds futures for January 20th implied market expectations for at least one full rate hike, but rallied slightly from Monday lows. Yesterday’s data included two big misses in high-frequency data that suggested the US economy could be slowing much faster than previously expected by forecasters. Housing Starts dropped 8.7% in February, well below the consensus forecast. The poor data continued with the CB Consumer Confidence Survey also fell well short of expectations, printing at 124.1 compared to a consensus forecast of 132.5. Today at 12:30 GMT February Current Account data will be released, and as always offers a potential occasion for Presidential trade angst on social media.
The loonie was one of the only G10 currencies to post gains against the US dollar yesterday as crude oil prices firmed back up to their 2019 high. Market participants will be looking at today’s Department of Energy report for last week’s US inventories. The release last week showed a 9.6 million fall in US inventories of crude and prompted a 1.4% gain in WTI. This week, the fall in inventories is expected to be much less with only 950k barrels expected to be shaved off.