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The pound was the best performing currency in the G10 on Wednesday, after Parliament voted against a no deal Brexit. The House of Commons voted 321 – 278 to reject the case of the UK crashing out of the EU without a deal.
Ministers broke ranks and have ruled out the worst-case Brexit scenario for the pound, which gave a strong boost to sterling. The pound rallied to $1.3381 versus the dollar, its highest level since June last year, whilst retaking the €1.18 level last reached in May 2017.
The pound, although off its overnight highs, is expected to remain buoyant with a solid floor beneath it, now that the worst-case scenario should be avoided.
Third Time Lucky?
With no deal off the table Theresa May has vowed to bring her deal back for a third time next week, in the hope that the Eurosceptics will finally support her or seriously risk no Brexit.
The focus will now shift to the third vote in the series. Today ministers will vote whether to extend Article 50. Whilst the no deal vote was widely expected, there is more uncertainty surrounding how this vote will go. However, should ministers vote to extend Article 50 beyond March 29th, the UK government will need to request the extension from the EU. This will involve all 27-member countries agreeing to the extension for a good reason.
Depending on whether Theresa May’s third attempt pushes the deal through Parliament as to whether she requests a long or short extension. This will also dictate the reason for the extension.
Given the level of frustration that Brussels have experienced with the UK and this deal, they could struggle to find the will to extend Article 50 without good reason. To continue discussing the same deal, they are unlikely to consider a good reason. The EU made their frustrations clear and have insisted that the only deal available is the one that has been discussed.
Markets depressed on mixed Chinese data
Wall Street closed higher after producer prices barely moved in February. With consumer prices also lower, the Fed are expected to remain patient for longer, boosting US equities. Asian markets were muted overnight as investors reacted to a mixed bag of data from China. It is questionable how much further this rally has to go, with global growth concerns still present and Trump in no rush to complete a trade agreement with China. European bourses are pointing to a softer start.
Oil hovers at 4 month highs
Oil was edging higher again in early trade on Thursday. WTI extended gains from the previous session, adding a further 0.3% taking the price to $58.48, its highest level since November last year. With OPEC’s cuts in full swing and persistent supply issues and a deteriorating picture Venezuela, oil is looking well supported.
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Trading on Wall Street was lacklustre, with the S&P moving between small gains and losses before moving lower into the close. News that a meeting between President Trump and China’s President Jinping Xi was being pushed back into April served to dampen dem…Read more