The UK Houses of Parliament took center stage last week as the Government’s “meaningful“ vote on Brexit was defeated, the Conservative Government’s cabinet all but mutinied against Prime Minister Theresa May, another vote rejected a “no-deal” Brexit and yet another vote successfully called for the Government to ask the European Union for an extension to the timing on when the UK leaves the European Union. The British Pound closed the week out higher at 1.3299!
This week, Mrs. May will again put her blighted Brexit deal up for approval and arguably it will be rejected for a third time; 27 EU Member states have to agree to an extension of Article 50- if not the UK will leave the EU on 29th March with “No-Deal” although they have voted against this outcome and which leaves the current twice-rejected deal as the only alternative! And so it’s possibly going to be a roller-coaster week for the British Pound depending on whether Europe agrees to an extension, what kind of internal political surprises the PM faces from her cabinet, and of course all the usual calls for a general election and a new referendum, which both seem to be gaining momentum with each passing day in this current chaotic period.
In the background, UK Employment figures will be announced on Tuesday (expected to show a 3-month rise of 120,000), inflation figures will be announced on Wednesday (expected to remain flat at 1.8% for February) and the Bank of England announces its interest rate decision on Thursday, with UK interest rates expected to remain on hold at 0.75%.
It’s a big week for interest rate announcements with both the Federal Reserve of the US (Wednesday) and the Swiss National Bank (Thursday) also expected to announce their respective decisions. In both cases they are likely to remain on hold. In the US, a poor payrolls number earlier in the month and a weaker Inflation number (1.5% Y/Y for February) last week, gives the Fed two good reasons to remain on hold in a 2.25-2.5% range. The SNB has been very reluctant to raise rates above negative 0.75% for fear of capital flows into Swiss Francs. It is expected to keep interest rates exactly where they are. The Bank of Japan will release minutes of its latest Monetary Policy meeting early on Wednesday morning, for those who wish to keep abreast of the thinking behind the BOJ’s current negative 0.1% interest rate.
New Zealand 4th quarter GDP is released late on Wednesday night with expectations of a slight decline to 2.5% Year on Year. Australian employment numbers are scheduled for release on Thursday morning with expectations of 15,000 new jobs created and unemployment remaining at 5.0%. Both Japan and Canada release inflation figures this week on Friday with Japanese CPI expected to rise to 0.3% Y/Y for February and Canadian CPI to stay at 1.4% Y/Y for February.
The main European economic releases this week are German ZEW (Center for European economic research) Survey on Tuesday expected at -11, the ECB Economic Bulletin published on Thursday and Eurozone Consumer Confidence (also Thursday) expected to read negative 7.1.
Gold spent last week oscillating around 1300 oz and seems quite contained in a broader 1180oz -1360oz range. US equities had a solid week largely due to an absence of negative data and expectations of a lengthy pause in Federal Reserve interest rate hikes.
Good luck and good trading! Ben Robson