Brexit continues to dictate sterling value and I would expect continue to anchor the pound until we have some substantiated, significant news.
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Teresa May’s current situation does not look good. She is currently trying to assess what Parliament will accept in order to push a deal through.
This of course has little bearing if she cannot gain the necessary concessions from Brussels.
If we look back to December when May knew a vote on her deal would result in failure she delayed the vote in the hope of gaining concessions from Brussels. She was stonewalled and her deal was voted down.
Jean Claude Junker, President of the European Commission has stated on many occasions there will be no concessions made.
She actually seemed to be in a better position then, when there was considered to be a higher probability of a no deal scenario. Now the chances of a no deal are substantially less. Morgan Stanley recently stated there was less than a 5% chance of this occurring.
May is set to have her deal voted on in Parliament on the 27th February and it looks like there is very little change from the deal since its failure to go through in December.
It seems the vote will again not be passed, which is very worrying considering the length of time until Article 50 is set to be invoked.
I do not believe a no deal scenario will occur. I think the likely options will be an 11th hour deal, despite Brussel’s posturing or an extension. Both of which should result in sterling strength.
Short term however I feel sterling will remain fragile and we could see losses against the majority of major currencies.
Today will see the release of average earnings and unemployment. We are expected to see an increase of average earnings from 3.4% to 3.5% and unemployment is set to remain at 4%. Both of these data releases are key to the health of the economy and can influence the markets. I think unemployment is slightly misleading however as it includes zero hour contracts which is hardly the healthiest form of employment.
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