Theme of ‘delays’ set to dominate the agenda

Today's news headlines:

  • 'Trump raises China trade hopes with tariff delay’. The $200 billion worth of new levies due to be applied on March 1st have been deferred in the wake of progress made between the two sides. Details over revised timings and what any resolution would look like are as of yet unknown. (Financial Times)
  • 'Theresa May delays crucial vote until 17 days before Brexit’. Demands are now being made that the Prime Minister explicitly rules out a no deal Brexit and failure to do this before Wednesday risks seeing the government lose control of the process altogether. (The Times)
  • 'EU considers 21-month delay if May can't get Brexit done’. Such a gambit could see pro-Brexit politicians throw their weight behind the current imperfect deal, to avoid the risk of Brexit being cancelled altogether. (Bloomberg)

Brexit

The UK’s planned departure from the European Union continues to show little sign of orderly progress. Theresa May has announced that she will defer this week’s vote, suggesting that renegotiations aren’t advancing. However, this won’t stop Wednesday’s planned vote on a cross-party amendment, which has the potential to see parliament wrest control of the Brexit process from the government. This would likely mean delaying the March 29th date, introducing further political uncertainty and potential for substantive Sterling volatility in the coming days.

US trade

Donald Trump has now backed down on the March 1st deadline for increased import levies on Chinese goods. While this concession suggests actual progress in trade negotiations, headlines from Chinese media outlet, Xinhua, reflect a less optimistic tone. Bloomberg reports: ‘Trade talks will be harder at the final stage, and new uncertainties can’t be ruled out. There needs to be a sober mind about the fact that the China-US trade frictions are long-term, complicated and arduous.’ Regardless, the quote from the US President has improved risk appetite in financial markets, weighing on the safe-haven US Dollar.

GBP/USD

The Pound continues to trade broadly sideways against the US Dollar. Notably, gains on Friday afternoon amid optimism over a Brexit deal being struck continue to hold.

EUR/USD

The pair has been stuck in a narrow channel of around half a cent for almost a week now. A quiet economic calendar for the day ahead may make a break out difficult in the short-term.

GBP/EUR

Again, the Pound has been largely rangebound against the Euro in recent days, with Brexit optimism lending some support ahead of the weekend break. Wednesday’s parliamentary vote could prove to be the next flashpoint for Sterling.