UK Parliament against May’s Brexit deal

Summary:

• Members of UK Parliament rejected a May’s Brexit agreement by a huge majority
• British currency remains fairly calm this morning, another vote to take place today
• A bag of gloomy data from Asian countries

Another tremendous defeat

There was no surprise on Tuesday evening as Prime Minister Theresa May failed to get support for her Brexit agreement she had altered just hours before the final vote in London. UK lawmakers rejected the May’s deal voting 242 in favour and 391 against. While it was a slimmer majority against compared to the vote taking place in January, it was a clear signal that chaos in UK politics is unlikely to end any time soon. After the vote Theresa May said “I continue to believe that by far the best outcome is the UK leaves the European Union in an orderly fashion with a deal.” She also added that getting a deadline extension does not solve the problem at all. In turn, the EU’s chief Brexit negotiator wrote on his Twitter account “The EU has done everything it can to help get the Withdrawal Agreement over the line. The impasse can only be solved in the UK. Our 'no-deal' preparations are now more important than ever before.” Despite another defeat of the May’s Brexit agreement the British pound did not move too much as such the outcome had been broadly expected. What’s next? UK lawmakers will vote on Wednesday whether the country should leave the EU without any agreement and this vote is likely to be doomed to failure once again. If so, the final vote will take place on Thursday and lawmakers are likely to approve a deadline extension until May 22 (the date falls before elections to the European Parliament). After the UK Parliament expresses a will to extend the Article 50, then the European Union is expected to approve such the decision. All in all, it means that we are heading for subsequent weeks of political uncertainty. Therefore, while the pound may cheer lack of a no-deal scenario in the short-term, it could struggle to gain much more when we will be slowly moving to another deadline expiration.

After hectic two days Wednesday’s trading has not brought any moves of note on the pound so far. Technically the EURGBP could be in a position to decline though. Source: xStation5

Disappointing data from Asia

Apart from the (never-ending) Brexit thread it is also worth looking what happened during Asian hours trading. Beginning with Australia we were offered Westpac consumer confidence data for March which produced a 4.8% MoM decrease. The index reached its lowest point since September 2017. In response to this release the Australian dollar fell quite quickly and it is the worst performing major currency this morning.

Even more disappointing data came from New Zealand from where we got the house sales data for February. A number of sold houses dipped 9.5% YoY after declining 2.5% YoY in January, the biggest annual drop since October 2017. House prices were up 0.7% MoM last month and were up 1% over the past three months. It needs to be noted that in January the data was affected by the RBNZ’s relaxation of LVR restriction but this effect is likely to provide only a temporary boost.

Last but not least, Japan’s core machinery orders declined 5.4% in monthly terms in January after falling 0.1% in the final month of 2018. The details show that we got another 18.1% MoM decline in overseas orders. Note that the overall fall would have been even deeper if the government’s orders had not increased 2.7%. The data seems to fit in the overall weakness of the manufacturing sector around the world. Furthermore, PPI inflation rose 0.2% MoM in February, slightly more than expected 0.1%.

Meanwhile the USDJPY is struggling with the lower bound of the bullish channel. If the pair manages to stay within the channel, bulls could aim for a test of 112. The key short-term support may be found nearby 111.1. Source: xStation5

In the other news:

• China’s Shanghai Composite falls 1.4% a while before the close

• Oil inventories fell 2.6 million barrels last week, according to API data