Sterling on front foot

The pound has been performing well since the UK government’s heavy defeat in the vote on the Brexit deal in parliament earlier this week and is trading at a little under 88p against the euro this morning, which is around 1.5p stronger than at the end of last week. The single currency is lower on the week against the dollar too, having shed more than half a cent since last Friday’s close to stand at around $1.14 (and which is down from last week’s high of circa $1.1550)

Following this week developments, the market seems to think that the prospect of a no deal Brexit is now less likely and/or that an extension to the Article 50 process will be needed to give more time to reach some agreement. While the government is in talks with opposition parties – though not formally with Labour whose leader is refusing to partake in discussions – the question remains whether there is a Brexit deal than can command majority support in parliament

Equity markets in the US have advanced steadily over the course of this week, with the S&P 500 up around 1.5% so far bringing its gains since the end of 2018 to 5% (and to 12% since last year’s low on Christmas Eve!). Core bond yields are also edging higher: US 10-year yields are up around 6bps this week to 2.76%

Data due today include retail sales in the US and consumer confidence and industrial production in the US