What’s been happening?

Pound Sterling – UK Markets 

The British pound posted modest gains against both the dollar and the euro on Tuesday supported by the latest political developments. Before British Prime Minister Theresa May addresses the 1922 Committee of her Conservative Party on Wednesday at 17:00 GMT, Jacob Rees-Mogg, the head of the European Research (ERG) group voiced his support for PM May’s the Brexit accord in a tweet that read: “Deal-or-No-Brexit becomes the choice eventually…May’s deal is better than not leaving at all.” Later in the day, Tory MP Boris Johnson adopted a similar tone by arguing that the risk of not leaving the EU at all would increase if they voted down May’s deal. However, Johnson further explained that there wouldn’t be a regulatory alignment unless he heard that there will be a Canada style deal. In the meantime, several news outlets reported that PM May will be asked to give a date for her resignation when she speaks to the Committee tomorrow.    

Earlier in the day, Northern Ireland’s Democratic Unionist Party (DUP) spokesperson Sammy Wilson reiterated the party’s position in a letter published in the Telegraph. “We won't let the PM or the remaining horde in parliament bully us into backing a toxic Brexit deal,” Wilson said. 

US Dollar – US Markets

The US Dollar Index gained traction on Tuesday supported by a rebound witnessed in the 10-year T-bond yield. Although the data from the U.S. came in mixed, the greenback didn’t have a difficult time staying resilient against its major rivals. The U.S. Census Bureau on Tuesday reported that housing starts declined by 8.7% in February but came in better than the market expectation of -28.3%. Furthermore, the Federal Housing Finance Agency announced that house prices in January increased by 0.6% to beat the analysts’ estimate of 0.3%.

Additionally, the Conference Board’s Consumer Confidence Survey revealed that the consumer sentiment deteriorated in March with the headline Confidence Index edging down to 124.1 from 131.4 in February. Commenting on the data, “Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board and added: “Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term. However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.” 

Euro – European Markets

The Gfk’s Consumer Confidence Index in Germany retreated 10.4 for April from 10.7 in March and missed the market expectation of 10.8. “Overall, consumer mood in March 2019 looks somewhat more balanced than in the previous month. Economic expectations are increasing again. However, both income expectations and propensity to buy have decreased somewhat,” the Gfk noted in its press release. Other data from the euro area showed that the GDP in France expanded by 0.3% on a quarterly basis in the fourth quarter to match the analysts’ estimate and the previous quarter’s reading. 

Meanwhile, European Central Bank Governing Council member and Slovak central bank Governor, Jozef Makúch, in a speech on Tuesday argued that the risk of a recession in the euro zone was very low by pointing out to improvements seen in some indicators and the resilience of the German economy. On the other hand, Governing Council member Olli Rehn said that slowdown in the euro area seemed more durable than just the short-term. 

What’s coming up? 

UK: The Confederation of British Industry (CBI) will publish its Distributive Trades Survey on Wednesday. More importantly, investors will stay focused on PM May’s political headlines.  

US: Trade balance from the U.S., which is expected to show a deficit of $57 billion in January, will be featured in the U.S. economic docket. 

EU: Several members of the ECB Governing Council, de Guindos, Mersch, and Praet, as well as President Draghi,  will be delivering speeches on Wednesday.