Brexit Briefing: Britsh Pound Uncertainty is Certain

Talking Points:

– GBPUSD drops to six-week low on bad prolongation PMI.

– UK domicile borrowing also falls for 2nd month in a row, definition BoE will be in no mood for rate rise.

– PM May faces Brexit Bill better in Lords.

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The British Pound came underneath offered vigour Wednesday – with GBPUSD dropping next 1.2400 for a initial time given mid-January after expansion in a UK prolongation zone slowed some-more than approaching in February. The UK prolongation PMI forsaken to a three-month low of 54.6, blank expectations of a tumble to 55.7.

Growth was still good above a sector’s long-term normal of 51.6, and a consult still suggests that a zone carried a decent volume of movement into 2017, with IHS Markit, that carried out a survey, indicating to “solid expansion of prolongation and new orders during February”.

But economists are warning that a tumble in a altogether new orders balance, from 57.4 to 56.3, is another warning pointer that domestic direct has enervated significantly due to a impact of cost rises from a weaker post-Brexit Pound.

It’s a identical story with Wednesday’s information on UK domicile borrowing expelled by a Bank of England. Mortgage approvals for new residence purchases rose from an upwardly revised 68,266 in Dec to 69,928 in January, above a accord foresee of an boost to 68,650. That’s a fifth monthly arise in a row, and also aloft than a normal turn of 68,700 seen in a 6 months before to a Brexit vote.

But a BoE reported that altogether domicile borrowing fell for a second month true for a initial time given 2012. Coming on a behind of Bank of England Governor Mark Carney’s new comments about wanting to see British consumers possibly power in their spending or keep adult borrowing to sentinel off rising prices, it’s a sign it’s in no mood to change a position on gripping seductiveness rates low before Brexit doubt subsides.

That’s not good news for Sterling, that on Wednesday forsaken to a six-week low of 1.2280 contra a Dollar (with a Greenback buoyed by a awaiting of a US rate hike) and a Euro (with a singular banking pepped adult by aloft acceleration in Germany).

It’s also some-more bad news for PM Theresa May, who is confronting a awaiting of her initial Brexit Bill better in a House of Lords. Opposition Labour peers reportedly trust they have adequate numbers to rectify a check to pledge a rights of migrants from a EU who are vital in a UK. It doesn’t meant a better of a Bill, that will enter a supposed ‘ping pong’ duration between a dual houses in Parliament. May is expected to use her infancy in a House of a Commons to opinion down a amendment. But a House of Lords better brings some-more Brexit uncertainty, that equals some-more Sterling uncertainty.

Brexit check timeline:

March 1

This starts a cabinet stage, when due amendments are discussed in some-more detail.

March 7

The peers discuss a final diction of a check and opinion on any probable amendments. These amendments go behind to a House of Commons for a approval. The check is upheld behind from residence to residence – a supposed ‘ping-pong’ duration until they both determine on a sum of a bill.

There is no accurate timeline for this, yet a Lords expects to send a check to a Commons for a final time on a week of Mar 13. The supervision has pronounced it expects to trigger a Article 50 grave depart by a finish of March.

Markets

— Written by Oliver Morrison, Analyst

To hit Oliver, email him during oliver.morrison@ig.com

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