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.
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.
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.
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.
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.