21/02/2019 - Resignations Rock May

GBP

Three lawmakers from Britain’s governing Conservatives quit over the government’s “disastrous handling of Brexit” on Wednesday, in a blow to Prime Minister Theresa May’s attempts to unite her party around plans to leave the European Union.

The lawmakers, who support a second EU referendum and have long said May’s Brexit strategy is being led by Conservative eurosceptics, said they would join a new independent group in parliament set up by seven former opposition Labour politicians.

The resignations put May in an even weaker position in parliament, where her Brexit deal was crushed by lawmakers last month when both eurosceptics and EU supporters voted against an agreement they say offers the worst of all worlds.

While the three were almost certain to vote against any deal, the hardening of their positions undermines May’s negotiating position in Brussels, where she heads later to try to secure an opening for further work on revising the agreement.

With only 37 days until Britain leaves the EU, its biggest foreign and trade policy shift in more than 40 years, divisions over Brexit are redrawing the political landscape. The resignations threaten a decades-old two-party system.

The three sat in parliament on Wednesday with a new grouping which broke away from the Labour Party earlier this week over increasing frustration with their leader Jeremy Corbyn’s Brexit strategy and a row over anti-Semitism.

What unites most of the group of 11 is a desire to see a second referendum on any deal May comes back with, now that the terms of Brexit are known in detail - something the prime minister has ruled out.

USD

The dollar gained on Wednesday after the Federal Reserve, in the minutes of its latest policy meeting, said the U.S. economy and its labour market remained strong, prompting some expectations of at least one more interest rate hike this year.

The Fed also emphasised the need for patience when it comes to monetary policy, noting that pausing U.S. rate hikes last month posed little risk and plenty of benefit, giving U.S. central bank policymakers time to observe the effects of past rate hikes as they assess the effects of a global slowdown.

Analysts said weaker-than-expected U.S. retail sales and industrial production numbers published this month dented the dollar’s near-term outlook.

Key Announcements

08.30 – EUR: German Flash Services PMI; Forecast at 50.0 against previous of 49.7
13.30 – USD: Core Durable Good Orders MoM; Forecast at 0.2% against previous of -0.4%