During the Asian session, the Greenback remained largely steady against its major peers as investors await inflation figures from the United States. The dollar was down 0.1% against its major peers, adding bulls for gold, while the British Pound jumped after the Brexit deal changes.
Here’s what to see in the market today.
US Dollar – CPI m/m
The inflation figures are highly correlated with labor market figures as it’s all about consumption – people usually consume more when they have a job or their business is booming.
Looking at the US labor market report for January 2019, the figures were mixed. The US market added just 20K jobs which are significantly lower than the forecast of 180K. Nevertheless, the unemployment rate fell from 4% to 3.8% and the average hourly earnings surged to 0.4% from 0.1% beforehand.
Here’s the thing – the surge in average hourly earnings could boost spending pattern of people, therefore causing a rise in overall demand, ultimately supporting the inflation rate.
The Bureau of Labor Statistics is scheduled to release US inflation data. Economists aren’t expecting any rise in inflation which is sort of unfavorable situation for the dollar. CPI rose at 0% rate during January, however, any rise in the February figures will support the dollar and vice versa.
GBP – Parliament Brexit Vote
The UK Parliament is going to hold a Parliament Brexit Vote where MPs will pass their verdict on Prime Minister Theresa May’s plan to take Britain out of the European Union on 29 March. The UK Members of Parliament will be passing their verdict on the deal Theresa May spent two years negotiating with the European Union.
Importance of This Vote
This vote is becoming highly significant as the Brexit deadline of 20 March is approaching.
If MPs rejects the deal, one of two situations is likely to happen.
- The United Kingdom will leave the European Union on 29 March without a withdrawal agreement
- Alternatively, the departure date will be delayed.
What if UK Members of Parliament Reject the Deal?
The UK MPs are widely expected to reject the deal and let’s say that really happens, then the MPs have been assured a vote on whether the UK should withdraw without a deal or not. This vote will happen on March 13, Wednesday.
As a last resort, Theresa May can also call for another final vote on EU summit on 22 March, to see if they can delay Brexit to finalize things. I must say it’s a complex scenario and the ifs & buts are causing uncertainty for investors. It’s really hard to say which way the market is gonna move, so I personally will avoid taking positions in the GBP until the voting is done.
Latest Updates on Parliamentary Votes
The British Pound continues to gain strength during the Asian session after Theresa May secured ‘legally binding’ assurances from the EU, ahead of today’s meaningful vote.
As per Theresa May, the European Union made legally-binding assurances that the United Kingdom will not be permanently trapped in a customs union. It’s a big point scored by May ahead of the parliamentary voting today. Let’s see how the market changes its sentiments.
Stay tuned to FX Leaders for latest updates on Brexit Voting. Good Luck!