EU approval no surprise
November 26th: Highlights
- Brexit ball back in Parliament’s court
- Draghi testimony to drive euro
- Dollar awaits fresh economic drivers but Mueller report due
May has two weeks before the vote to determine Brexit
Facing the heads of the twenty-seven remaining members was always going to be the “easy part” for Mrs. May although there were and remain some dissenting voices. Spain has extracted more concessions over Gibraltar and French President Emmanuel Macron has said that France will be pushing hard for access to the UK’s fishing grounds as part of the trade negotiations.
The agreement will now be put to a “meaningful” vote in the House of Commons, most likely between the 10th and 12th of December. As things stand, it is unlikely to be passed. All the opposition parties are going to vote against. There may be a few abstainers from Labour but they will be, in all probability, be more than matched by Government rebels despite the inability of Brexiteers to gain enough support to force a vote of confidence in their leader. As has always been the probable outcome, the Prime Minister will rely on the tenuous support of the Northern Irish MP’s who have publicly stated that they feel both abandoned by the agreement and let down in their agreement to support the Government.
It is part of the Prime Ministers charm offensive having the desired effect and warnings of dire consequences simply hark back to the original argument about whether a bad deal is better than no deal.
The pound has opened Asia this morning marginally lower after Friday’s close at 1.2815 versus the dollar. It is likely that traders will wait to see how the week unfolds before deciding the possibilities for the vote which has distilled the entire two years of negotiations into one final act.
Draghi to face tough questions on the economy
Sr. Draghi is faced with a fairly empty toolbox when it comes to stimulating growth and he will be aware that inflation is also starting to pick up although not yet sufficient for the ECB’s view on interest rates to be under threat.
The single currency has remained in a relatively narrow range, trading in a 1.1473/1.1327 range last week, closing at 1.1330.
With the economy struggling to show meaningful growth, Brexit likely to add a drag as trade with the UK becomes tougher and the Italian budget issue still a major concern, the outlook for the single currency is far from certain as we enter the final month of the year.
Dollar awaiting fresh drives as political clouds continue to gather
Robert Mueller, former FBI director, has remained tight-lipped over the past few weeks as rumours have swirled around the capital that the report is about to be published although there have been no leaks, merely speculation, into its contents.
The President has maintained his “no collusion” rhetoric but with a Democrat-controlled House of Representatives about to be sworn in, he may be starting to feel a little “hot under the collar.”
The U.S. economy continues to perform well but there are a few storm clouds gathering on the horizon. FOMC chairman Jerome Powell has cited three concerns that may disrupt the return of interest rates to normality: the delayed effect of rate hikes, the reduction of the benefit of the fiscal stimulus from earlier in the year, and a slowdown in emerging market growth and activity.
While a rate hike this month is both expected and unusual, it appears that Powell may just be preparing markets, and the dollar, for a halt to his program in the new year.
On Friday, the dollar index reached 96.98 and closed close to that level. It is likely that the market will start to speculate this week on the employment report which won’t be released until December 7th. The market remains quite bullish on the headline, looking for a read in excess of +220k but economists will be far more interested in whether the increase in average earnings can remain above 3%.
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”