Pound lurches higher on Brexit updates
Today's news headlines:
- 'Theresa May poised to open the way for delaying Brexit’. The move will be welcomed by businesses and saw the Pound jump higher last night but will deepen divisions within the Conservative Party. MPs would have the option to delay should the meaningful vote on March 12th fail. (Financial Times)
- 'Fed's Powell heads to Congress amid shifting landscape’. Six months on from his last testimony, the Federal Reserve head will be talking about a very different economy. US politicians, many of whom are now thinking about re-election, will be looking for confidence that any slowdown is temporary. (Reuters)
- 'Jeremy Corbyn: we’ll back a second referendum to stop Tory no-deal Brexit’. The move is seen as a bid to stop the growing divisions within the Labour Party, although any ballot appears likely to be designed to confirm a Brexit deal rather than proceed to a no-deal or stop the process altogether. (The Guardian)
US monetary policy
Jerome Powell, the Chair of the Federal Reserve, will testify in front of US politicians today. The underlying economy has shifted fundamentally over the last six months, and lawmakers will be keen to clarify whether the current slowdown is temporary. With the market now pricing in one Federal Reserve rate cut before the year is out, Powell will likely find himself pressed to add substance to the appearance of a decline in US growth. A cautious tone here could leave the US Dollar under fresh pressure.
The Pound pushed out to fresh highs for the month against the US Dollar in the wake of last night’s Brexit news. UK economic data is limited for the day ahead, although Bank of England (BoE) Governor Mark Carney is due to meet the Treasury Select Committee, so any comments over growth prospects could provide further direction for Sterling.
Despite the avoidance of a no-deal Brexit being positive for the Eurozone, last night’s news was insufficient to drive the Euro out the narrow range it has occupied against the US Dollar for the last week. With no EU economic news on the calendar for today, any direction is likely to come from across the Atlantic, where a pessimistic outlook from the Fed could send the pair higher.
Again, the Pound found support against the Euro off last night’s news of a possible Brexit delay, pushing the cross out to the top of the 22-month trading range. Sentiment over Brexit and the accompanying political risk will likely determine where the pair goes from here.