Embracing the festive spirit

Last week it was clear that MP’s were getting into the festive spirit by turning Parliament into the latest pantomime. Last week Teresa may survive the vote of no confidence, securing 63% of the votes. Though she has confirmed she will not be leading the Tories into the next election in 2022. While May remains at the helm it’s worth remembering that Maggie Thatcher survived a leadership challenge but stepped down days later after realising she could not lead the majority.

The issue of the Backstop dominated discussions, May went to seek ‘reassurances’ from the EU to ease the minds of those who oppose the current deal.
Donald Tusk insisted that there will be no re-negotiation but stressed that they will endeavour to provide more reassurances to the UK.

With no concrete changes or concessions made by the EU, it’s unlikely that ‘reassurances’ will be enough to swing votes.

On Friday Tony Blair made a fresh pitch for a second peoples vote on Brexit saying that there could be a majority support for a new EU poll if Parliament ended up “gridlocked”. Though this was countered by the shadow education secretary said it would undermine democracy and that “People made the decision and you can’t keep going back” saying, ‘Would you like to answer it a different way?'”

Both parliament and the EU are stepping up preparations for a ‘no deal’ Brexit. Uncertainty is hurting the pound and with no clear way forward there is a clear downside risk for the pound. While the pound remains at a low point, clients would be wise to consider how forward contracts can help to reduce further losses.

Last week’s GBP data

UK m/m GDP came in as expected at 0.1
UK Manufacturing production came in below expectations of 0.0% at -0.9%
GBP average earnings index at 3.3, beating the forecast of 3.0

The week ahead:
Wednesday:
UK CPI y/y
CAD CPI m/m
USD FOMC statement and conference
NZD GDP q/q
AUD unemployment data
JPY Monetary policy statement

Thursday
GBP retail sales m/m
MPC official bank rate votes

Friday
GBP current account
CAD retail sales and GDP m/m
USD final GDP q/q