What’s been happening?

Pound Sterling – UK Markets 

The British pound jumped to its best level against the dollar in seven months on Wednesday and extended its gains vs the euro to touch its highest point since May 2017 as the currency continued to gather strength on hopes of Article 50 getting extended instead of the UK crashing out of the EU without a deal despite the fact that British Brexit Secretary Barclay earlier in the day reiterated that no-deal Brexit was still on the table.

While the House of Commons was voting on the Brexit amendment F, which was tabled by Yvette Cooper, “Commons is now voting on my amendment which simply notes & pins down what the PM said yesterday about holding votes in event of UK facing No Deal. The Government said they accept it. But some of ERG have decided to vote against!! How desperate are they to get No Deal?” Yvette Cooper tweeted out. Nevertheless, the amendment passed by 502 votes to 20 and none of the MPs who voted against the amendment were from the ERG leadership.

On Wednesday, the British Retail Consortium reported that the Shop Price Index, which gauges price changes in popular retail outlets in the UK, rose 0.7% on a yearly basis in February. Earlier in the day, Reuters reported that the latest survey conducted by the British Recruitment and Employment Confederation’s (REC) revealed that the employers’ confidence in the UK continued to deteriorate. “The REC gauge of confidence in the economy slid to -20 in the three months to January, the lowest reading since the survey started in mid-2016 and down from -14 in the previous report,” Reuters said.  

US Dollar – US Markets

The U.S. Treasury bond yields continued to drive the dollar’s price action on Wednesday and boosted by a 2% increase seen in the 10-year reference, the US Dollar Index closed the day in the positive territory for the first time since last Thursday.

The data published by the U.S. Census Bureau showed that the trade deficit in December rose to $79.6 billion to surpass the market expectation of $75.3 billion. Other data from the U.S. revealed that pending home sales in January rose by 4.6% on a monthly basis to beat the analysts’ estimate of 0.4% by a wide margin. 

Later in the day, in his second day of testimony before the Congress, FOMC Chairman Jerome Powell said that they will be announcing ‘something fairly soon’ on the balance sheet plan and further added that the size of the balance sheet will be driven by demand for liabilities. Additionally, Powell echoed his message about staying patient with regards to policy outlook. 

Euro – European Markets

The shared currency weakened against both the dollar and the pound sterling on Wednesday. The European Commission in its latest Business and Consumer Survey reported that the consumer confidence improved slightly to -7.4 in February from -7.9 in January. Underlying details of the publication revealed that the services sentiment index rose to 12.1, business climate index stayed unchanged at 0.69 and economic sentiment indicator ticked down to 106.1. On a negative note, the industrial confidence index slumped to -0.4 to miss the market expectation of 0.1.

In an interview with Bloomberg on Wednesday, Deutsche Bundesbank President and the ECB Vice-President Jens Weidmann said that the normalisation of the monetary policy would be a gradual process lasting several years and added that there was no ‘accute need’ to adjust the ECB’s rate guidance. Commenting on Germany’s economic performance, Weidmann said that the German economy's soft patch was more protracted than expected but key factors driving growth were still intact.

What’s coming up? 

UK: Nationwide Housing Prices will be the only data release from the UK on Thursday.

US: Weekly jobless claims, fourth quarter GDP growth, Chicago PMI and Kansas Fed Manufacturing Index will be featured in the U.S. economic docket. 

EU: Germany’s Destatis will publish the inflation report, which is expected to show the annual CPI rising to 1.5% in February.