Sterling is firmer this morning ahead of tomorrow’s Brexit vote in the UK parliament, trading at a little over 89p against the euro and at $1.28 against the dollar, though it seems Theresa May’s government is facing defeat despite the likelihood of the EU providing reassurances regarding the temporary nature of the backstop (if it ever comes into place) ahead of tomorrow
In the event that the Brexit deal is defeated – which means the legal default is then a no-deal exit from the EU on March 29th next – the UK government will, by this day week, have to outline how it intends to proceed. The Labour leader has also said he will seek an early election by putting down a motion of no confidence in the government, while the media reported over the weekend that a cross-party group of MPs will try to take control of the legislative agenda in parliament with a view to preventing a no-deal exit. In any case, the political atmosphere is likely to be febrile and sterling volatile as events play out over the coming weeks and months
The euro is off its best levels against the dollar and is trading at a little over $1.1450 this morning, having climbed to around $1.1575 at one stage last week. Meanwhile, equity markets advanced last week, though they gave up some of their gains on Friday, while bonds yields in the core markets nudged up
The annual rate of headline CPI inflation in the US edged down again in December, to 1.9% from 2.2% in November, reflecting the impact of lower oil prices recently, though the core rate held steady last month at 2.2%
Data due this week include industrial production in the Euro area today; CPI inflation and retail sales in the UK on Wednesday and Friday respectively; and retail sales in the US on Wednesday.