What’s been happening?

Pound Sterling – UK Markets 

The British pound weakened against both the dollar and the euro for the third straight day on Friday after British Parliament rejected Prime Minister Theresa May’s withdrawal deal by a majority of 58, 344 vs 286. Addressing the lawmakers following the voting outcome, PM May said that European leaders will now need to agree to an extension and reiterated that the government will continue to press the case for an orderly Brexit. Responding to the political developments in the UK, European Council President Donald Tusk announced that there will be an EU summit on April 10. Additionally, “A "no-deal" scenario on 12 April is now a likely scenario. The EU has been preparing for this since December 2017 and is now fully prepared for a "no-deal" scenario at midnight on 12 April. The EU will remain united. The benefits of the Withdrawal Agreement, including a transition period, will in no circumstances be replicated in a "no-deal" scenario. Sectoral mini-deals are not an option,” the European Commission said in a statement.

Earlier in the day, the data published by the UK’s Office for National Statistics showed that the economy expanded by 0.2% on a quarterly basis in the fourth quarter and carried the annual growth rate up to 1.4% from 1.3% in the third quarter. Moreover, the ONS reported that total net lending to individuals edged down to £4.6 billion in February to match analysts’ estimates while total business investment contracted by 0.9% in the last quarter of 2018.

US Dollar – US Markets

The US Dollar Index extended its rally on Friday but struggled to preserve its momentum after the data from the U.S. weighed on the currency. The U.S. Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, eased to 1.8% on a yearly basis in January from 2% in December and fell short of the market expectation of 1.9%. Furthermore, personal spending and personal income increased by 0.1% and 0.2%, respectively, to miss experts’ forecasts.

Although other data from the U.S. revealed that the UoM’s Consumer Confidence Index improved to 98.4 in March’s final reading from 97.8 in the previous estimate and new home sales rose 4.9% in February, the greenback struggled to gain traction.

Earlier in the day, Dallas Fed President Robert Kaplan said that the yield curve was indicative of growth skepticism. “The economy is more sensitive to interest rate changes than ever before due to high levels of public and private debt,” Kaplan added. Meanwhile, Minneapolis Fed President Neel Kashkari argued that the current posture of pausing rate “made a lot of sense.”

Euro – European Markets

The shared currency recorded small gains against the pound sterling and weakened modestly vs the greenback on Friday amid a lack of significant macroeconomic data releases from the euro area. In his speech titled “Heterogeneity And The ECB’s Monetary Policy,” European Central Bank (ECB) Governing Council member Benoit Coeure said that medium-term inflation expectations were close to levels consistent with the ECB’s price stability objective. Earlier in the day, commenting on the policy outlook, Governing Council member Ignazio Visco echoed the ECB’s latest monetary policy statement by saying that rates were expected to the current level until the end of 2019.

What’s coming up? 

UK: The IHS Markit will release the Manufacturing PMI report on Monday and Parliament will hold an indicative vote on Brexit alternatives.  

US: Retail sales, construction spending and Manufacturing PMI data of the ISM and the IHS Markit will be featured in the U.S. economic docket. 

EU: The Eurostat will release annual CPI data and the IHS Markit will publish the Manufacturing PMI for the eurozone, Germany, France, and Italy.