13/12/2018 – May Wins Confidence Vote

GBP

The pound held onto most of the previous session’s gains on Thursday after British Prime Minister Theresa May survived a no-confidence vote, buying time to try to steer her unpopular Brexit deal through a deeply divided parliament.

Theresa May won a vote of confidence although more than a third of conservative lawmakers voted against her, leaving her authority damaged. A total of 317 Tory MP’s voted on May’s leadership and May won the vote which was 200 to 117 in her favor. Having survived a scare, May now turns her attention to head to a summit in Brussels on Thursday to seek concessions on her Brexit deal that can help her sell it to a hostile Parliament.

In an emotional private meeting with her critics before the ballot, May said she would not be leading them into the next general election in 2020 – a concession that one Cabinet minster said was a necessary compromise.

USD

U.S. consumer prices were unchanged in November, held back by a sharp decline in the price of gasoline, but underlying inflation pressures remained firm amid rising rents and healthcare costs.

The strength in underlying inflation reported by the Labor Department on Wednesday supports views that the Federal Reserve will raise interest rates at its Dec. 18-19 policy meeting. The U.S. central bank has hiked rates three times this year. But with oil prices tumbling, financial market conditions tightening and economic growth slowing, some economists believe the Fed could settle for fewer rate increases in 2019.

November’s flat reading in the Consumer Price Index followed a 0.3 percent increase in October. It was the weakest reading in eight months. Excluding the volatile food and energy components, the CPI increased 0.2 percent, matching October’s gain. That lifted the year-on-year increase in the so-called core CPI to 2.2 percent from 2.1 percent in October.

The Fed’s preferred inflation measure, the core PCE price index excluding food and energy, increased 1.8 percent year-on-year in October, the smallest gain since February, after rising 1.9 percent the prior month. It hit the U.S. central bank’s 2 percent target in March for the first time since April 2012.

Economists expect the core PCE price index to hover below that target for much of 2019, which they say could see the Fed temporarily halting interest rates hikes.

Key Announcements

12.45 – EUR: Main Refinancing Rate; Forecast to not change from 0.0%
13.30 – EUR: ECB Press Conference