It has been something of a round trip for sterling over the past twenty four hours, with the pound strengthening initially on optimism (misplaced as it turned out) that Theresa May’s Brexit deal might have a fighting chance of passing in parliament, but losing gerund again as it became obvious (once the Attorney General gave his legal advice on the deal) that defeat – and a very sizeable one it proved to be – was inevitable.
Sterling is trading this morning at around 86p against the euro, so more or less where it closed out last week, and at $1.31 against the dollar, slightly firmer than at the end of last week. Meanwhile, the euro has gained a little ground on the dollar following softer than consensus inflation data in the US
Tonight the UK parliament will vote on a motion ruling out leaving the EU on March 29th without a deal. Assuming it rejects a “no-deal” departure, parliament will tomorrow vote on an extension to Article 50, which the EU would have to approve at next week’s Council meeting. There will also be amendments to the motions today and tomorrow, which may shape how the Brexit process will proceed from here
The annual rate of headline CPI inflation in the US fell to 1.5% in February, a little softer than the consensus expected, with the core rate dipping to 2.1%, also a touch weaker than consensus but still within the range of 2.1% to 2.4% that has prevailed for a number of months now. The data prompted a decline in US bond yields, with 10-year yields almost 5bps lower at close to 2.60%
Data due today include industrial production for January in the Euro area, with some rebound expected after quite sharp falls in both November and December, while the UK Chancellor presents his Spring Statement