What’s been happening?

Pound Sterling – UK Markets 

After posting gains against both the dollar and the euro in the first half of the day, the British pound lost its strength in the evening after the Northern Irish Democratic Unionist Party's (DUP) in a statement declared that they won’t be backing British Prime Minister Theresa May’s deal. Furthermore, Parliament couldn’t find a majority for any Brexit options to further weigh on the currency. Commenting on this development, Brexit Secretary Barclay argued that this process strengthened their view that the PM’s deal was still the best option. Meanwhile, following May’s speech before the 1922 Committee, a conservative lawmaker told reporters that the PM wanted to get the withdrawal agreement over the line and then start the "process to replace her." 

“Given the fact that the necessary changes we seek to the backstop have not been secured between the Government and the European Union, and the remaining and ongoing strategic risk that Northern Ireland would be trapped in backstop arrangements at the end of the implementation period, we will not be supporting the Government if they table a fresh meaningful vote,” the statement read.

Earlier in the day, the CBI Distributive Trades Survey in March showed that retail sales volumes declined by 18% in March. “Across the broader economy, underlying conditions remain subdued, particularly as Brexit uncertainty and slower global growth continue to hold back momentum. For more detail on our view of the outlook, see the CBI’s December Economic Forecast,” the CBI further noted in its publication. 

US Dollar – US Markets

The US Dollar Index, which gauges the dollar’s value against a basket of six major currencies, rose for the second straight day on Wednesday. However, the 10-year Treasury bond yield slumped to its lowest level since December 2017 by losing more than 1.5% in the day, suggesting that the dollar is likely to have a difficult time extending its gains.

The data published by the U.S. Census Bureau on Wednesday revealed that the trade deficit January narrowed to $51.1 billion from $59.9 billion in January and bettered the analysts’ estimate of $57 billion. “January exports were $207.3 billion, $1.9 billion more than December exports. January imports were $258.5 billion, $6.8 billion less than December imports,” the press release read. 

Euro – European Markets

The shared currency fell to its lowest level against the dollar in more than two weeks on Wednesday and gained value vs the pound sterling. In the absence of macroeconomic data releases, the euro struggled to find demand.

While delivering a speech in Frankfurt, European Central Bank President Mario Draghi reiterated that risks to the outlook remain tilted to the downside. On a positive note, “A soft patch doesn't necessarily foreshadow a serious slump,” Draghi added. “Remain confident that sustained convergence of inflation to target has been delayed rather than derailed.” Moreover, the ECB’s chief economist, Peter Praet, stated that the bank was alert to the downside risks and all instruments were available following the return to rate guidance as for the main policy tool.

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Thursday.  

US: Weekly initial jobless claims and fourth quarter GDP growth data will be featured in the U.S. economic docket. 

EU: The European Central Bank will release the private loans data and the European Commission will publish the latest business and consumer survey, which will include industrial confidence, business climate, economic sentiment, and consumer confidence indexes.