Parliament will vote once more on Brexit tomorrow but it is not yet apparent whether this will be another “meaningful” vote on PM May’s deal or something different.
There is some speculation that lawmakers will be asked to vote on the withdrawal agreement but not the “political declaration” which may be seen as a legal success should it get the required support but would leave opposition MPs and the public at large feeling that the government has pulled a fast one. This talk is gaining credence as it would surely satisfy speaker John Bercow’s criteria of not being substantially the same and may well find more support than previous attempts at the combined withdrawal agreement and political declaration.
The pound has remained under pressure today, with the currency experiencing pretty much one-way trade ever since the DUP announced they would not support May’s deal yesterday evening.
The decline has been fairly steady and not too dramatic in its nature, but the move could well gather momentum in the next few days if the current political impasse shows no sign of abating with no-deal prospects seemingly being resurrected.
EUR/USD falls to 3-week low after German inflation miss
There are growing signs of disinflation around the eurozone, with the latest data from Germany coming in lower than forecast and a key inflation expectation gauge dropping to its lowest level since September 2016.
The HICP for Germany Y/Y came in at +1.5% vs +1.6% expected, extending its recent decline. Regional releases earlier in the day hinted that the countrywide figure could be soft, and the decline will dampen expectations somewhat for a sizeable rise in the EU release due out on Monday.
On the topic of inflation, a key market gauge of long-term euro zone inflation expectations fell to within 6 basis points (0.06%) of its all time low earlier today, with the five-year, five-year forward declining to its lowest level since September 2016 at 1.31% and down by 0.1% on the week.
Eurozone CPI; German CPI; Spain CPI; Italy CPI
German inflation figures extended their decline with the latest release and attention now turns to the EU numbers due out on Monday. Source: XTB Macrobond
Lower inflation is often seen as negative for a country’s (or bloc’s) currency in the short-term as it will persuade the central bank to pursue a more accomodative monetary policy. This month there’s been so-called “dovish” moves by both the ECB and the Fed which have had a clear short-term impact on the market. However, both these moves have lack the necessary momentum to sustain and ultimately faded and reversed in the hours that followed.
The bigger picture sees the EUR/USD remain under pressure and the pair has drifted back into the low $1.12s this afternoon and trade at its lowest level in 3 weeks. Source: xStation