It looks set to be a broadly positive week for European equity markets, despite an economic backdrop that offers few signs of a pickup, with the Eurostoxx 50 on course to post its highest weekly close since September last year.
The FTSE100 also looks set to post its first positive week in a month, helped by a decent performance from the oil and gas and banking sector.
Having come to the end of a busy week of parliamentary votes at Westminster it would appear that we are no closer to ascertaining what common position MPs would like to coalesce around with respect to the Brexit process.
In a week of serial losses, the government did manage to defeat one amendment which would have wrested control of the Brexit process away from the executive by the wafer-thin margin of 2 votes.
MPs also voted unanimously, by 210 votes to approve the motion requesting that the Prime Minister ask EU leaders for a one-off extension to the article 50 process, though she needed opposition votes to do it given 188 Conservative MPs voted against the motion to extend, including the Brexit secretary, Stephen Barclay, who only minutes earlier had urged MPs to vote for it. Maybe he walked into the wrong lobby by mistake? I wonder how many of these MPs voted to rule out no deal?
This means that for now the Prime Minister has managed to retain control of the Brexit process and can resurrect her rather battered withdrawal agreement for another vote on or before 20th March next week, in a third attempt to railroad it through Parliament before she is forced to go to the EU to request that extension. If the deal passes, which still looks a tall order without the support of the DUP, then an extension until 30th June would probably be a formality.
Another failure of the deal would mean that control of the next steps of the Brexit process would then pass into the hands of EU leaders, all 27 of them at next week’s European Council meeting. They would then have to weigh up the risks of a lengthy extension, when balanced against the risks of a no deal Brexit.
This still remains the default option in law, and as such still needs a majority of MPs to pass legislation to push out the article 50 date. If the EU are too punitive in their demands for an extension public opinion may well take a dim view if MPs simply roll over, despite this week’s rejection of a “no deal” Brexit.
Away from the spotlight of Brexit there is still the small matter of economic data to digest, with the focus returning once again to central bank policy and the prospect that it is likely to remain loose for the foreseeable future.
This morning’s decision by the Bank of Japan to keep monetary policy on hold is no surprise given the weak data from Japan we’ve seen this week, and along with the European Central Bank last week, there remains little prospect that we’ll see any tightening of policy for the foreseeable future.
Today’s final EU CPI numbers for February are likely to reinforce this view with the headline number expected to be confirmed at 1.5%, and core prices set to come in at 1%.
The latest US data has also shown little signs of an inflationary impulse, while recent manufacturing data has also been a little on the soft side of late, after a strong 2018. Empire manufacturing is expected to pick up from 8.8 to 10.1 in March.
EURUSD – the euro appears to have found some support at the 1.1180 area which is 61.8% retracement of the entire 1.0340/1.2545 up move. We now look to be squeezing higher with a move up to the 1.1400 area a real possibility.
GBPUSD – pushed up to 9-month high this week and could well head up towards the 1.3500 area in the coming days. We do still remain vulnerable to downward thrusts with support still back down near the 1.3000 area and the 200-day MA.
EURGBP – made a new marginal 22-month low earlier this week, but does appear to have found some support between 0.8475/80, with a break below 0.8470, potentially targeting the 0.8400 area. We could head back towards resistance at 0.8570 level in the interim.
USDJPY – appears to have finally moved through the 111.45 area and the 200-day MA. A push through 111.50 opens up a return to the 112.00 area. A move below 111.30 runs the risk for a return towards the 110.20 level.
FTSE100 is expected to open 14 points higher at 7,199
DAX is expected to open 16 points higher at 11,603
CAC40 is expected to open 8 points higher at 5,357
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