Sterling Takes a Hit… Brexit Not Going Well

March 12, 2019

Sterling depreciated 0.9% overnight against the dollar, which is otherwise down 0.2% against the yuan and Swiss franc and by 0.1% vis-a-vis the euro and kiwi. The dollar is also unchanged relative to the yen, loonie, Australian dollar and Mexican peso.

Prime Minister May’s attorney general said changes in the handling of the Irish border in the revised Brexit deal that the government is now presenting do not remove the fact that the backstop in the future could not be removed without the EU’s consent. This interpretation seemingly reduces the likelihood that parliament will approve the Brexit deal. Legislators will debate the revised deal later today and follow such with a vote.

The rise in the U.S. stock market on Monday lent upward momentum to Asian stock markets, which climbed 1.8% in Japan, 1.6% in Hong Kong, 1.3% in India, 1.1% in China, 0.9% in Taiwan, and 0.7% in Singapore. In Europe, the British Ftse climbed 0.4%, but continental markets are down 0.4% in Switzerland and Italy, 0.3% in France and Germany, and 0.2% in Spain.

Ten-year U.S. Treasury and Japanese JGB yields firmed a basis point. The British gilt yield dipped a basis point, and the German bund is steady.

West Texas Intermediate crude oil advanced 0.7% to $57.19 per barrel, and Comex gold is 0.4% firmer.

Assistant Deputy Governor DeBelle of the Reserve Bank of Australia warned of risks to Australian financial stability from climate change.

National Australia Bank’s monthly measures of business confidence and business conditions each fell to two-month lows in February. Mortgage loans in that economy sank 1.2% in January on top of drops of 0.6% and 8.0% in the final two months of 2018.

The British goods and services trade balance widened for a fourth consecutive month in January, reaching GBP 3.835 billion versus GBP 1.967 billion last September. The merchandise trade deficit (goods only) increased to GBP 13.08 billion in the latest reported month.

British industrial production in January contracted for a fifth straight month, this time by 0.6%, which kept the 12-month rate of decline steady at 0.9%. Construction output, by contrast, rose 2.8% on month in January and by 1.8% on year.

A 0.5% month-on-month rebound in British GDP during January still left the 3-month on 3-month growth rate at a lowly 0.2%.

Small business sentiment in the United States according to the monthly NFIB measure rose by 0.5 index points in February from January’s 14-month low. With a reading of 101.7, such was well down from 108.8 six months earlier.

The Japanese Ministry of Finance’s quarterly measure of business conditions faced by large companies swung from a reading of +4.3 in the final quarter of 2018 to negative 1.7 in this quarter and is expected to stay marginally below zero through the spring. Manufacturing took the biggest hit, dropping 12.8 points to -7.3, while business conditions for large non-manufacturers lost 2.7 points to +1.0.

Consumer prices were reported in Portugal, Romania, Sweden, and Greece. Year-on-year inflation in those economies in February stood at 0.9%, 3.8%, 1.9% and 0.6%. Those rates, except in the case of Sweden, were above January readings. Swedish inflation held at January’s 8-month low.

Cypriot GDP expanded 1.0% last quarter, maintaining a 3.8% year-on-year pace for a third straight quarter.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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