News & analysis


Sterling marginally sold off yesterday as the marvel mad Boris Johnson evaded a joint press conference with Luxemburg’s Prime Minister Xavier Bettel. In the one man press-conference, Bettel didn’t pull any punches saying “Brexit is a nightmare”. The British PM cancelled his appearance in front of the cameras as the anti-Brexit crowd would have been too loud to hear Bettel. Today, the Supreme Court will start the process of assessing whether Johnson’s dissolution of Parliament was lawful following mixed verdicts from courts in London and Edinburgh. The verdict is unlikely to be released until Thursday afternoon at the earliest, but if ruled unlawful, Parliament could be recalled. The ramifications of the hearing aren’t limited to just the PM and the path for Brexit, but also the wider constitution. Last Friday the Supreme Court decided to increase the number of judges from 9 to 11, evidencing the significance of the vote and how fine the margins are likely to be. In Westminster, Boris will be briefing his cabinet on the latest Brexit negotiations following yesterday’s luncheon with the President of the European Commission – Jean-Claude Juncker.


The euro sat broadly on the back foot yesterday, not helped by poor Chinese data in the morning and a broad risk-off feel given the crude oil spike. The European Central Bank’s chief economist, Philip Lane, also spoke at a Bloomberg conference in London where he outlined the central bank’s sole mandate to bring inflation to target. Lane defied much of the discontent from the continent and stated the bank could lower its deposit rate further while easing fears of the limited scope of the Asset Purchasing Programme. The damage for the euro is seemingly done as the dollar makes broad inroads against the G10 this morning, however, the single currency is trading relatively flat. That could all change with the release of the German ZEW expectations survey at 10:00 BST.


The US dollar is back on the front foot after a relatively bad start to the week. Following the oil-related news over the weekend, the greenback opened marginally lower in Asia but has since reclaimed ground to trade closer to its recent highs as haven currencies, along with petro-linked currencies, surged. The market’s focus will soon shift onto the upcoming Federal Reserve meeting tomorrow. Forward guidance will be the key for the dollar as markets have already priced in another 25 basis point cut. The emphasis will be on the growth and the projected path of rates, especially given the increased optimism of late that a US-China trade deal will be reached in the near future.


The loonie joined the Norwegian krone and Japanese yen as the sole currencies to make gains against the US dollar yesterday. The risk-off sentiment and spike in oil prices marginally filtered into currency markets, helping the petro-linked currencies predominantly. Little news has filtered out about the likely response from the US with regards to filling the supply shock in oil markets, while Aramco officials states it will take weeks if not months for production to return to prior levels. The data calendar is light for the loonie today ahead of tomorrow’s CPI release and Fed rate decision, meaning oil markets will likely drive price action yet again.