FX Week Ahead: Brexit Progress; NZ CPI; Aussie Jobs; BOJ & ECB Rate Decisions

ALL WEEK | -- GMT | GBP BREXIT NEGOTIATIONS ONGOING AHEAD OF JANUARY 29 DEADLINE

UK Prime Minister Theresa May has presented her ‘Brexit Plan B’ to parliament and reactions have been tepid at best. It seems that the prime minister’s renewed effort to get her deal through the House of Commons differs little than her first attempt, and by judging from the reaction of parliamentarians, it seems doubtful that ‘Plan B’ will pass muster either if a vote is held by the January 29 deadline. Reports over the weekend indicated that UK PM May might attempt to renegotiate the Good Friday Agreement, a politically fraught endeavor that would undoubtedly add a new matrix of complexity to an already overbearing Brexit problem.

At this point, if a no deal, ‘hard Brexit’ is to be avoided, it would appear that an extension beyond the March 29, 2019 deadline may be necessary. However, with the European parliamentary elections due up in July, it’s doubtful any extension to the Brexit deadline would go beyond there. Late on Monday, cross-party talks produced a bill designed to thwart a no-deal, ‘hard Brexit’ scenario by forcing PM May to postpone Brexit if no deal were reached by February 26.

Pairs to Watch: EUR/GBP, GBP/JPY, GBP/USD

01/22 WEDNESDAY | 21:45 GMT | NZD CONSUMER PRICE INDEX (4Q)

Q4’18 New Zealand inflation data are due to reflect the prevailing trend across the developed economic world, where the late-2018 energy market crash has had a significant negative effect on topline inflation figures. Quarterly price pressures are expected in flat after having gained +0.9% in Q3’18, while the yearly reading is due in at +1.8% from +1.9%. As such, inflation is set to remain below the RBNZ’s medium-term target of +2%,leaving little opportunity for 2019 rate hike expectations to tighten in any meaningful way. Currently, rates markets are leaning more towards a rate cut than a rate hike this year: there is a 30% chance of a 25-bps rate cut by June 2019.

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