UK Still Trying To Avoid A Lengthy Brexit Extension

Fundamental analysis of Forex market


  • PM May likely to bring a 3rd version of the Withdrawal Agreement to Parliament in attempt to avoid a long Brexit extension
  • No surprises from BOJ on its rate decision; tweaks some of its assessments regarding exports and output due to global growth slowdown



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  • Bank of Japan (BOJ) kept its policy steady (as expected). Left its Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintained its policy framework of “QQE with Yield Control” around 0.00% and asset purchases at annual pace of ¥80T. Maintained its overall economic assessment that domestic economy was expanding moderately but exports and output were affected by overseas economies
  • Japan Aso: If we insist too much on achieving 2% inflation target, things could go wrong
  • China Premier Li stated that China economy faced new downward pressure; won’t let growth slide out of reasonable range. Could use tools like RRR cut to cope with uncertainties. Formalized tax and fee cuts to offset downward pressures. Announcement came as China’s national legislature was closing its annual session
  • China National People’s Congress (NPC) approved foreign investment law; to take effect Jan 1st, 2020
  • China Industry Min: Set its first batch of 2019 rare earth mining output quota at 60K tons
  • North Korea stated that Leader Kim was rethinking launching and test moratorium. US ‘threw away’ golden opportunity at Hanoi (Vietnam) summit.


  • UK Parliament passed the Govt motion to extend Article 50 delaying the Brexit date from March 29th. The outcome bought PM May some time to try and persuade doubters in her own Conservative Party to back her proposal or risk a lengthy postponement to Brexit
  • Parliament rejected ‘Amendment I’ (Benn) by 314-312 vote; amendment would have taken control of parliamentary debate over Brexit away from the govt and also defeated ‘Amendment H’ which called for a 2nd Referendum on Brexit (as expected) the vote was 85-334


  • Senate voted 59-41 to block President Trump’s emergency declaration on the Mexico border (as expected). Trump affirmed that he would veto bill (Note: Senate would need 67 votes to override veto)
  • Treasury Sec Mnuchin: working with China on an ‘extensive’ document; confirmed that President Trump and President Xi would not be meeting this month
  • Treasury Sec Mnuchin reiterated that he supported clean debt ceiling increase; urged Congress to raise debt limit soon


  • (JP) Japan: As expected the BoJ left policy unchanged with BoJ Governor Kuroda acknowledging the impact of trade tensions on the Japanese economy, but commented that China’s stimulus is pretty big and will have an impact. He also sound out a defense of ultra-accommodative monetary policy settings, saying negative rates helped create a desirable yield curve and spoke about the importance of sticking to the 2% inflation target.
  • (UK) United Kingdom: With just two weeks to go before the UK is slated to leave the EU the situation remains uncertain. A no-deal scenario has been ruled out, and not just at the end of March, as May had wanted, but under any circumstances. It doesn’t actually take the risk of a no-deal off the table though. As it stands the UK is still set to leave the EU by the end of March, with or without deal. We are left then with the UK likely to ask the EU for a short term technical extension until the end of June which will have to be unanimously agreed by all 27 member states.



  • Indices [Stoxx600 +0.2% at 379.1, FTSE +0.4% at 7216, DAX +0.2% at 11609, CAC-40 +0.4% at 5371.2, IBEX-35 +0.4% at 9247, FTSE MIB +0.2% at 20911, SMI -0.1% at 9470, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes:

  • European Indices trade mostly higher across the board tracking a positive session in Asia and higher US Index futures. Cable remains mixed after UK MPs approved a motion setting out the option to ask the EU for a short delay to Brexit if an agreement on a Brexit deal can be made by March 20th.
  • On the corporate front shares of UBS decline after publishing their annual report and disclosing provisions for litigation, regulatory and similar matters reducing Net profit by $382M. Restaurant Group gains sharply on earnings and guidance, with Max Automation, JD Weatherspoons, Korian, Berkeley Group and U-blox among other risers after earnings.
  • H&M declines over 4% despite a Q1 Revenue beat, as profitability concerns weigh; MQ Holdings declines almost 30% on earnings and announcement of a rights issue. In other news Wessanen rises on a potential offer from PAI Partners for €11.50/shr; Wirecard falls on reports its Indian Subsidiary is being looked into, while Nyrstar also declines following the deferring of an bond interest coupon.
  • Looking ahead notable earners include Kirkland, Terraform Power and Buckle among others.


  • Consumer discretionary: H&M [HMB.SE] -5.5% (Q1 sales), Parrot [PARRO.FR] +0.5% (earnings), J.D. Wetherspoon [JDW.UK] +1.5% (earnings), Wessanen [WES.NL] +17.5% (potentially to be acquired), PageGroup [PAGE.UK] +1% (CEO accident), Restaurant Group [RTN.UK] +8.5% (earnings)
  • Financials: UBS [UBSG.CH] -1% (annual report; financial adjustments; outlook), Swedbank [SWEDA.SE] -1.5% (comments on media reports regarding suspicious flows), Berkeley Group [BKG.UK] +1.5% (trading update), Investec [INVP.UK] +1% (briefing statement)
  • Industrials: Volkswagen [VOW3.DE] -0.5% (disclosed could be the subject of SEC action), Ferrovial [FER.ES] +0.5% (Heathrow traffic)
  • Technology: Wirecard [WDI.DE] -7% (press speculation on probe; denies it)


  • ECB’s Rehn (Finland) called for strategy review to ensure credible policy. Analysis would not question primary goal of price stability. Latest decisions helped preserve ECB’s accommodative stance. Reiterated that region wasnot heading to recession, just experiencing a slowdown. Also reiterated that core inflation remains subdued
  • Ireland Fin Min Donohoe urged the UK to lay out how to avoid no-deal. Reiterated that EU had no wish to trap UK in backstop; Brexit backstop would be temporary
  • BOJ Gov Kuroda post rate decision press conference reiterated that price momentum was in place but would take time to achieve the price target. Reiterated that was appropriate to continue with current policy. Global slowdown was impacting domestic exports and production. China economy was unlikely to slow down further given the recent stimulus steps
  • IEA Monthly Oil Report maintained its 2019 global oil demand growth forecast at1.4M bpd and 2019 Non-Opec supply at 1.8M bpd. It noted that OPEC Feb oil production was at 30.68M, lower by 240K bpd m/m. OPEC compliance at 94%; Non-Opec 51% (prior 86% and 25% respectively)

Currencies/ Fixed Income

  • FX markets were quite subdues in trading thus far in the session with the USD showing just a slight uptick.
  • GBP/USD remained below 9-month highs registered earlier in the week after a heard Brexit option was formally taken off the table by the UK parliament. On Thursday the House of Commons granted itself a few week Brexit extension. However, the unity of PM May Cabinet remained in question after 8 of her most senior ministers refused to back her plan to delay Brexit. PM May likely to bring the 3rd version of the Withdrawal Agreement to Parliament on Tuesday (Mar 19th) ahead of the European summit next Thursday (Mar 21st). If PM again fails in her quest to get her deal approved then EU would likely insist on a long extension

Economic Data

  • (PE) Peru Jan Economic Activity Index (Monthly GDP) Y/Y: 1.6% v 2.4%e
  • (PE) Peru Feb Unemployment Rate: 7.6% v 6.8%e
  • (NL) Netherlands Jan Trade Balance: €2.9B v €3.6B prior
  • (NL) Netherlands Jan Retail Sales Y/Y: 2.7% v 0.9% prior
  • (DE) Germany Feb Wholesale Price Index M/M: +0.3% v -0.7% prior; Y/Y: 1.6% v 1.1% prior
  • (EU) EU27 Feb New Car Registrations Y/Y: -1.0% v -4.6% prior (6th straight decline)
  • (FI) Finland Jan GDP Indicator WDA Y/Y: 1.5% v 2.3% prior
  • (NO) Norway Feb Trade Balance (NOK): 15.8B v 28.8B prior
  • (DK) Denmark Feb PPI M/M: -0.2% v +0.6% prior; Y/Y: 3.0% v 3.2% prior
  • (TR) Turkey Dec Unemployment Rate: 13.5% v 12.8%e
  • (FI) Finland Jan Current Account Balance: +€0.8B v -€0.2B prior
  • (CN) Weekly Shanghai copper inventories (SHFE): 264.6K v 236.2K tons prior
  • (CZ) Czech Jan Industrial Output Y/Y: -1.1% v +1.6%e; Construction Output Y/Y: -13.2% v +4.3% prior
  • (AT) Austria Feb CPI M/M: 0.0% v -0.8% prior; Y/Y: 1.5% v 1.8% prior
  • (RU) Russia Narrow Money Supply w/e Mar 8th (RUB): 10.30T v 10.17T prior
  • (TR) Turkey Feb Central Gov’t Budget Balance (TRY): -16.8B v 5.1B prior
  • (IT) Italy Jan Industrial Sales M/M: +3.1% v -3.6% prior; Y/Y: +0.6% v -7.4% prior
  • (IT) Italy Jan Industrial Orders M/M: +1.8 v -1.4% prior; Y/Y: -1.2% v -4.7% prior
  • (PL) Poland Feb CPI M/M: 0.4% v 0.1%e; Y/Y: 1.2% v 1.2%e
  • (IT) Italy Jan General Government Debt: €2.358T v €2.326T prior

Fixed Income Issuance

  • (IN) India sold total INR180B vs. INR180B indicated in 2021, 2027, 2032, 2035 and 2044 bonds
  • (ZA) South Africa sold total ZAR vs. ZAR650M indicated in I/ L 2025, 2038 and 2046 bonds

Looking Ahead

  • 06:00 (EU) Euro Zone Feb Final CPI Y/Y: 1.5%e v 1.5% advance; CPI Core Y/Y: 1.0%e v 1.0% advance; CPI M/M: +0.3%e v -1.1% prior
  • 06:00 (IT) Italy Feb Final CPI (includes tobacco) M/M: No est v 0.2% prelim; Y/Y: No est v 1.1% prelim; CPI Index (Ex Tobacco): No est v 102.2 prior
  • 06:00 (IT) Italy Feb Final CPI EU Harmonized M/M: No est v -0.2% prelim; Y/Y: No est v 1.2% prelim
  • 06:00 (CY) Cyprus Feb Harmonized CPI M/M: No est v -0.8% prior; Y/Y: No est v 2.1% prior
  • 06:00 (EU) Daily Euribor Fixing
  • 06:00 FR) France Debt Agency (AFT) announces upcoming issuance
  • 07:00 (IE) Ireland Jan Trade Balance: No est v €4.6B prior
  • 07:00 (BR) Brazil Mar FGV Inflation IGP-10 M/M: 1.2%e v 0.4% prior
  • 07:00 (UK) DMO to sell €B in 1-month, 3-month and 6-month bills £2.0B, £2.0B and £2.0B respectively)
  • 07:00 (TR) Turkey to sell Euro-denominated debt
  • 07:30 (IN) India Weekly Forex Reserves w/e Mar 8th: No est v $401.8B prior
  • 07:45 (US) Daily Libor Fixing
  • 08:00 (IL) Israel Feb CPI M/M: -0.1%e v -0.1% prior; Y/Y: 1.0%e v 1.2% prior
  • 08:00 (BR) Brazil Jan IBGE Services Sector Volume Y/Y: +1.7%e v -0.2% prior
  • 08:30 (US) Mar Empire Manufacturing: 10.0e v 8.8 prior
  • 08:30 (CA) Canada Jan Manufacturing Sales M/M: +0.4%e v -1.3% prior
  • 09:00 (CA) Canada Feb Existing Home Sales M/M: -4.0%e v +3.6% prior
  • 09:00 (UK) Baltic Dry Bulk Index
  • 09:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 09:00 (ES) Spain Debt Agency (Tesoro) announces upcoming on upcoming bond issuance
  • 09:15 (US) Feb Industrial Production M/M: +0.4%e v -0.6% prior; Capacity Utilization: 78.5%e v 78.2% prior; Manufacturing Production: +0.1%e v -0.9% prior
  • 10:00 (US) Jan JOLTS Job Openings: 7.225Me v 7.335M prior
  • 10:00 (BE) Belgium Jan Trade Balance: No est v -$2.4B prior
  • 10:00 (US) Mar Preliminary University of Michigan Confidence: 95.7e v 93.8 prior
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 16:00 (US) Jan Net Long-term TIC Flows: No est v -$48.3B prior; Total Net TIC Flows: No est v -$33.1B prior

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