Yesterday saw a muted start to the week with North America on national holiday, observing Martin Luther King Day. The result saw a subdued session across the foreign exchange markets and most other financial asset classes too.
The pound was one of the few currencies to see a little volatility across Monday’s trade. The currency sold off on Brexit concerns in early morning trade, pushing toward the $1.28 level against the buck and back into the €1.12s against the single currency. Theresa May confronted Parliament yesterday afternoon, offering insight into her ‘plan B’. Regardless of the same material being repeated, going back to Brussels to seek further assurances etc, the pound still lapped it up, retracing all its losses on the day and even gaining some fresh ground. As you’ll probably have gathered from the previous sentence, PM May did not offer anything new yesterday. Plan B is effectively Plan A. To many MPs it must have felt like Groundhog Day yesterday, the PM back in Parliament assuring them she will seek new assurances and commitments from the EU regarding the Irish backstop. Many would have been scratching their heads thinking this is identical to what happened in December after the initial vote was pulled. Either way – the saga continues with as much uncertainty as ever. UBS Wealth Management put it quite plainly in a research note yesterday “We don’t think now is the time to be buying sterling.”
US participants return back to their desks today so volatility should increase. We have a tier 1 data release from the UK this morning in the form of an employment report reflecting last month’s jobs numbers. We’ll also see a German ZEW economic sentiment report scheduled for 10am. Quick heads up, the US government is still on shutdown, as a result, data releases will still be impacted.
Written by Viv Savani. 10:10am, January 22nd 2019
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