What’s been happening?

Pound Sterling – UK Markets 

The British pound stayed relatively quiet against the euro and weakened modestly vs the dollar on Thursday as markets continued to react to political developments in the UK in the absence of significant macroeconomic data releases.

Lawmakers today rejected all the amendments and accepted the main motion presented by the government, by a majority of 210 votes, to extend Article 50. However, with the voting results not offering any surprises, the market reaction stayed muted and didn’t allow the volatility to pick up. Earlier in the day, a BBC reporter quoted a DUP source saying “Tweaks won't cut it in talks with the government on Brexit deal,” to weigh on the currency. The next meaningful vote is expected to take place on March 20th. According to British Cabinet Office Minister David Lidington, if the deal is rejected, once again, next week, a long extension to Brexit will be necessary.

US Dollar – US Markets

The US Dollar Index, which posted losses every single trading day since the disappointing nonfarm payrolls data release last Friday, staged a modest recovery on Thursday and closed the day in the positive territory. Nonetheless, the lack of fundamental drivers behind today’s action suggested that today’s rebound was a technical correction. 

The weekly data published by the U.S. Bureau of Labor Statistics showed that initial jobless claims increased by 6,000 to 229,000 in the week ending March 9. Other data revealed that import prices and export prices both rose 0.6% on a monthly basis in February. Finally, new home sales declined by 6.9% in January to miss the analysts’ estimate of -0.6% by a wide margin. Despite the uninspiring data, an increase of nearly 1% seen in the 10-year US Treasury bond yield supported the greenback. 

Meanwhile, citing three sources familiar with talks, Bloomberg reported that the Trump-Xi summit was likely to be delayed until the end of April. On a similar note, Treasury Secretary Mnuchin confirmed that there won’t be a meeting in March. On the other hand, President Trump reiterated that the U.S. was doing very well in trade talks with China.             

Euro – European Markets

Ahead of Friday’s critical eurozone inflation data, the shared currency lost value vs the dollar on Thursday and posted small gains against the pound sterling. Germany’s Destatis announced that the Consumer Price Index (CPI) in February dropped to 0.4% on a monthly basis and forced the annual rate to tick down to 1.5%. Further details of the publication revealed that the Harmonized CPI stayed unchanged at 0.5% and 1.7% on a monthly and yearly basis, respectively, as expected.   

What’s coming up? 

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

US: Industrial production, JOLTS job openings, and the UoM Consumer Sentiment Survey will be featured in the U.S. economic docket. 

EU: Consumer Price Index from the euro area, which is expected to rebound to +0.3% in February from -1 in January, will be released on Friday. Germany’s Destatis will publish February wholesale price index as well.