15/02/2019 - May Loses Brexit Vote Again

GBP

Sterling was stuck near one-month lows on Thursday after Prime Minister Theresa May lost a symbolic Brexit vote in parliament, weakening her hand as she seeks to renegotiate her withdrawal agreement with Brussels.

The Pound was little moved after the result of the motion, which sought to reaffirm support for May’s plan to seek changes to her deal, after earlier tumbling on media reports that the government would lose.

Eurosceptic lawmakers in May’s own party had been expected to abstain or vote against May as they feared she was softening her position on a no-deal departure from the European Union.

Thursday’s defeat, while humiliating for the prime minister, will also further worry investors fearful that she cannot persuade lawmakers to back her agreement in a forthcoming vote, or convince Brussels to grant her some concessions.

With six weeks to go before Britain is due to leave the EU, markets are growing more anxious. Many traders are avoiding taking positions until a firm resolution on Brexit is secured.

Still, many traders are sitting on the side-lines as they face a plethora of possible Brexit outcomes, including a delay to the scheduled March 29 departure date - seen as increasingly likely by some investors - or even a second Brexit referendum. If May did open the door to a second referendum, analysts say sterling would bounce significantly.

USD

The US had a poor session yesterday after both retail sales and the producer pricing index disappointed. US retail sales unexpectedly fell in December, posting the worst drop in nine years in a sign of slower economic momentum and producer prices fell for a second straight month in January.

The PPI figure was the smallest annual increase in 1-1/2 years, the latest sign of benign inflation that could allow the Federal Reserve to be patient about raising interest rates this year. The Labour Department said its producer price index for final demand dipped 0.1 percent last month as the cost of energy products and food fell.

Retail sales fell 1.2 percent and the broad weakness across most sectors adds to signs that U.S. economic growth is cooling from prior quarters -- potentially by more than projected -- as consumption makes up about 70 per cent of the economy. All but two of 13 major retail categories showed a decline, with non-store retailers - which includes online stores - falling 3.9 per cent, the most since November 2008. This boosted speculation that the Federal Reserve will hold off on raising interest rates this year amid concern about trade and global growth.

Key Announcements

09:30 – GBP: Retail Sales is expected to increase to 0.2%