Johnson continues to fight for 31 Oct departure

Despite Boris Johnson’s plans to rush to legislation for the UK to leave the EU on October 31st being voted down by MPs, yesterday was a historic moment for Brexit.

MP’s voted in favour of a Withdrawal Agreement for the first time, paving the way for the country’s (eventual) departure. Johnson had threatened to withdraw the entire Brexit Bill if his plans were defeated and while he stopped short of abandoning his plans entirely, he did confirm that the debate would be suspended while he consults with Brussels about how long an extension they would grant the UK in order for the deal to be properly debated.

Johnson’s decision to suspend the debate was roundly criticized. Opposition leader Jeremy Corbyn offered to work with the Government to agree on a timetable that allowed for proper consultation. This was a veiled attempt to take over the process and lead the country towards a second or people’s referendum. Senior Conservative MP Kenneth Clark, one of the Rebel MPs recently suspended by the Party for failing to support the Government in recent votes spoke in the House of Commons of the fact that the three-day timetable Johnson desired being unworkable but all it needed was a little more time for the deal to be agreed by the majority of the house.

The pound, which had rallied, touching the 1.30 level versus the dollar, fell back to a low of 1.2860 and has continued to correct overnight as traders expressed their disappointment that the entire process now seems certain to fail in its primary target.

While the Government awaits news from Brussels about how long an extension the EU will offer, Johnson has confirmed that if the delay is for three months he will push for a General Election. Any election would be based upon a single issue with the Government campaigning that they are the only Party willing to go through with Brexit, a policy they believe could win them an overall majority.

Considering your next transfer? Log in to compare live quotes today.

Washington and Beijing making progress

The “phoney war” between the U.S. and China that has brought about tariffs on goods being imported by America and a retaliatory devaluation by China seems to have taken a turn for the better as both sides have independently confirmed that progress is being made towards a solution.

The fact that in this dispute neither side will be able to claim a victory given the vast gulf between their demands means that talks are likely to continue virtually indefinitely. However, if there is progress being made the global economy can be considered in a positive light since as long as they are talking, they are not “putting up roadblocks”

In the past few weeks, the market had realized that the dollar had become too strong mostly due to the inherent weakness of both the euro and pound which make up a large percentage of the index. A correction was always likely as traders long of the greenback took profit on their positions. That “healthy correction” appears to be finding a base close to 97.20 as Brexit falters and the pound weakens again. With important data being released in the Eurozone later today and tomorrow (see below) the dollar has the potential to rally back towards the middle of its longer-term range.

That longer-term outlook is dominated by the prospects for monetary policy. President Trump is keen for the Fed to cut and continue to cut rates as he enters the final year of his first term in office. As the race towards the 2020 election “hots up” Trump remains favourite to be re-elected, but it is likely to be far closer than had once seemed to be the case and this uncertainty will add to volatility in the financial markets.

With an FOMC meeting a week away and a crucial employment report following immediately after that, there will be significant two-way interest as the year draws to a close.

Yesterday, the dollar index rallied to a high of 97.57 having again bounced off support around 97.20. It closed at 97.53 and has continued to move higher overnight.

Data to drive short term direction for the single currency

Today marks the start of a two-day focus on the Eurozone economy as first, consumer confidence, then activity indexes dominate the short-term outlook.

Today the Eurozone-wide report on consumer confidence is expected to continue the recent theme of weaker data as last month’s -6.5 is succeeded by a marginally weaker -6.7. While the actual number is less important than the trend, the fact that consumer confidence shows little sign of improving is barely a surprise since living standards are stagnating.

The data on consumer confidence is followed tomorrow by what is becoming the most important indicator of the strength (or otherwise of the economy). The “Markit” Purchasing Managers Indexes for both Germany and the wider Eurozone have become the most crucial data for traders to gauge activity in both industrial and manufacturing heartland and the entire region. While activity in the Eurozone has been weak it has not “fallen off a cliff” as it has in Germany.

Last month, German industrial output fell to 41.7 (remember, anything below 50 denotes contraction) and it is expected to have improved only marginally this month. That would be significant since it would be the first improvement in six months, no matter how small that improvement may be. Across the entire region, there is a growing hope that the economy is bottoming out and tomorrows data will perhaps not confirm this but at least arrest the recent slide.

The euro remains hemmed in remaining in a relatively narrow range. Yesterday, it traded between 1.1159 and 1.1117, closing at 1.1134. While the data won’t change the market’s perception overnight, it will provide another piece to the jigsaw.