What’s been happening?

Pound Sterling – UK Markets 

The pound sterling started the week under pressure and weakened modestly against both the euro and the dollar as investors continued to assess the latest Brexit headlines and the potential impact of different exit scenarios on the UK’s economy. European Commissioner for Economic and Financial Affairs, Pierre Moscovici, sounded optimistic on Monday when he said that he believed a no-deal Brexit could still be avoided but failed to support the currency.

While delivering her remarks before the House of Commons, British Prime Minister Theresa May said there was not enough support in the House to hold a third vote on her Brexit deal and reiterated that changing the withdrawal agreement was not an option. “The alternative is to pursue a different form of Brexit or a second referendum,” PM May added. Regarding the indicative votes, May said that she was skeptical about the process.   

US Dollar – US Markets

The US Dollar Index, which tracks the greenback’s value against a basket of six major currencies, struggled to find direction on Monday and stayed near last week’s closing level. The Chicago Fed reported that the National Activity Index edged down to -0.29 in February from -0.25 in January. “Two of the four broad categories of indicators that make up the index decreased from January, and three of the four categories made negative contributions to the index in February. The index’s three-month moving average, CFNAI-MA3, moved down to –0.18 in February from a neutral reading in January,” the bank’s publication read. Other data revealed that the manufacturing activity in the Texas area softened with the Dallas Fed Manufacturing Index dropping to 8.3 in March from 13.1 in February.

Commenting on the yield curve inversion earlier in the day, Chicago Fed President Charles Evans noted that yield curves were showing a slightly higher chance of a recession. “Rates are at a decent place, this is a good time to pause. Global growth concerns are another reason to hold policy,” Evans added. Furthermore, Philly Fed President Patrick Harker repeated that he was in favour of one rate hike ‘at most’ this year and one in 2020. 

Euro – European Markets

The shared currency gained value against both the British pound and the dollar on Monday supported by the upbeat data that helped ease concerns over an economic slowdown in the euro area. The headline German Ifo business climate index improved to 99.6 in March from 98.5 in February and beat the analysts’ estimate of 98.7. Further details of the report revealed that the current economic assessment rose to 103.8 points and the expectations index edged higher to 95.6. Commenting on the data, Ifo economist Klaus Wohlrabe said that the latest figures supported the expectation of German GDP expanding by 0.6% in 2019. “Brexit is a burden on Germany's industrial sector and the global economy not providing any support for the German economy,” Wohlrabe added.

While delivering a speech in Lisbon, European Central Bank (ECB) Governing Council member Benoit Coeure argued that excess savings rather than monetary policy were behind the German bond yields’ fall below 0%. “The ECB is not at the limit of what it can do yet on monetary policy,” Coeure said on the bank’s policy outlook. 

What’s coming up? 

UK: BBA mortgage approvals will be the only data release from the UK on Tuesday.  

US: Building permits, housing starts, consumer confidence, and the Richmond Fed Manufacturing Index will be featured in the U.S. economic docket. 

EU: Gfk Consumer Confidence from Germany and fourth quarter GDP data from France will be published on Tuesday.