Opposition will not support repackaged deal

The UK Prime Minister Theresa May presented the terms of her repackaged Brexit Withdrawal Agreement yesterday. It contained a significant sweetener provided MPs allow it to pass when presented for the fourth time in a couple of weeks.

The incentive is that she will allow the House of Commons to debate a second referendum and if they agree a vote will be held to allow the public to confirm agreement.

In what is considered a shrewd political gamble, Mrs May is dangling the carrot of a second referendum in front of MPs but they need to accept that her deal is the only one on offer first.

So far what will the alternative on the ballot paper would be hasn’t been disclosed but is probable that it will be no deal. Mrs May is adamant that her deal or no deal are all that is left after months of indicative votes none of which could gain majority support in the House of Commons.

Even members of her own Party are labelling this as nothing more than a rehash while the Opposition is remaining stoic in the view that the further concessions that have been made over worker’s rights, Northern Ireland and a customs compromise are too little too late and represent very little change to the Government’s position.

There have been renewed calls for Mrs May to leave now as she has no more to offer but it is certain that she will have one more go at getting the agreement passed before riding off into the sunset.

The pound closed barely changed on the news once reaction had been digested. It initially rose to a high of 1.2815, having as low as 1.2686, closing at 1.2733.

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Powell concerned about corporate debt in a slowdown

Jerome Powell, the Chairman of the U.S. Federal Reserve, expressed his concern in a speech on Monday night about the record levels of corporate debt being seen currently in the U.S.

While Powell is currently relaxed (he said) about the current situation, he commented that should the economy slow down to a level that is beyond current expectation then the debt could become a major issue.

As expected the market chose to read that as a subtle way of expressing concern over the fortitude of the market in its support for the dollar. However, it did raise concerns that the Fed’s policy on rate hikes may change in the coming months.

The news of the suspension of the Trump Administration’s addition of Chinese tech giant Huawei to an economic blacklist also gave the dollar a boost despite traders awaiting news from the Eurozone regarding both elections and economic activity.

The dollar index maintained its recent strength rallying to a new high of 98.13 and closing above 98.00 for the first time in over two weeks.

Euro drifts ahead of data and elections

The single currency is trading in a narrow range, immune to movements in other markets, as it awaits the release of significant data later in the week. The release of consumer confidence data provided a rare ray of light, rising from -7.3 in April to -6.5 in May while this still predicts a negative outlook, the economy is expected to improve gradually.

Mario Draghi will speak later this morning following a non-monetary policy meeting of the General Council of the ECB. He is unlikely to veer too far off track, continuing to predict an upturn in activity as soon as wage inflation feeds through into prices.

With the elections coming this weekend (the UK kicks things off on Thursday) just how the political landscape is affecting the economy will become clearer.

If there is a clear move towards the nationalist right, Sr. Draghi’s hopes for a more integrated financial as well as political landscape could well be dashed.

The single currency traded between 1.1142 and 1.1188 yesterday, closing a few pips lower on the day at 1.1160.