Dollar Trades Heavily, While Prospects Of A Softer And Later Brexit Send Sterling Higher

Europe

There is only one story that resonates with investors today, and that is the Brexit drama. Later today there will be a vote in the House of Commons over May's proposal to hold two votes on March 12--the Withdrawal Bill and leaving with no-deal. The worst for the UK would be that nothing gets majority support. A vote today may seek to force May's hand:  seek an extension if the Withdrawal Bill fails. Rees-Moog has reportedly dropped his demand that the Irish backstop gets dropped. He now says he is open to some legal language that would limit the duration of the backstop, which is not something the EC appears willing to accept. The prospect of a later and softer exit continues to fuel sterling's recovery.  

The euro is firm, but in narrow ranges near yesterday's best level, which is the first time in three weeks it is testing $1.14. The 61.8% retracement of this month's decline is found a little higher, closer to $1.1410. The market can push a bit higher, but caution is likely as next week's ECB meeting approaches, where some further indication that a new long-term loan facility will be forthcoming may temper the demand for the single currency. There are also some large options that expire on March 1 ($1.1350 for 1.5 bln euros, $1.1425 for 1.8 bln euros, and $1.1450 for 1.5 bln euros). Sterling jumped above $1.32 yesterday and is testing $1.33 today. We have suggested potential toward $1.34-$1.35. Immediate support now is seen near $1.3240.  

America

US factory and durable goods orders are the last data points ahead of tomorrow's look at Q4 GDP. The median forecast is around 2.5% Q4 GDP, and weighed down by Powell's "crosscurrents" growth is expected to have slowed more here in Q1. Housing starts reported yesterday (December) were simply horrible, but the new strength in the Conference Board's consumer confidence should ease some concerns, though of course, the naysayers are right that consumer confidence peaks before a downturn. Canada reports January CPI figures, and the base effect warns of a large drop on the headline rate (from 2.0% to 1.4%), but the Canadian dollar may come under pressure if the underlying measures soften a bit too.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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