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Busy Brexit week keeps markets buzzing

Published: Thursday 21 March 2019

  • Just the job
  • Inflation on the rise - but London house prices are falling
  • Keep holding on
  • What to watch out for next?
By the Halo Financial Team

Given the complexity – and length – of the Brexit saga, it seems like you need to be a financial and political genius to work out what is going on!

Luckily (and very modestly!) Halo Financial is here to break this week’s momentous events down into simple terms so we can all understand what is going on and how it is affecting Sterling.

Earlier in the week, the Speaker (the person who maintains OR-DERRR!) In the House of Commons – quoted a 400-year-old rule to suggest that if Prime Minister Theresa May wanted to bring back her Brexit deal to be voted upon by MPs for the third time, it had to be substantially different.

The decision threw the UK government into a panic and with just days to go until the 29th March deadline when Britain is scheduled to leave the European Union, Mrs May has written to the European Union asking for an extension.

Mrs. May wants a postponement until 30th June, but with European elections due soon, the EU may limit the extension to 23rd May. Any changes have to be agreed by all 27 EU Member States.

The Pound initially rose against its major currency pairings on hopes of a longer delay, but the suggestion of a mere three-month delay has not helped the Pound and the continued uncertainty is likely to chip away at the currency and the nation’s confidence.

One thing is certain, Brexit will dominate the performance of GBP over the next week. Talk to your Halo Financial Currency Consultant if you need any guidance.

Just the job
There was one piece of good news for the UK government, as official figures showed UK employment hit a new record 32.7 million from November 2018-January 2019. The 76.1% employment rate is the highest since records began in 1971, says the Office for National Statistics (ONS).

…but London house prices are falling
Meanwhile, UK house price growth hit a six-year low, and London values are falling, says the ONS. Prices in the capital fell 1.6% in the year to January 2019, 0.9% more than the month before. Values in the UK as a whole rose 1.7% compared with 2.2% in December. If the trend continues, housing prices could fall later in the year for the first time since the global financial crash.

Bank of England relief for investors?
The Bank of England (BoE) Monetary Policy Committee (MPC) meets today, Thursday 21st March. The outputs of such meetings often sink Sterling strength, although no big surprises re expected. It is certainly not the time to be raising interest rates, so hopefully investors can breathe a sigh of relief after this latest meeting, before returning their focus to Brexit.

Keep holding on…
As expected, Wednesday’s Federal Reserve meeting kept rates on hold and signalled there is likely to be no move for some time. Its more cautious tone set the US Dollar falling against its major pairings, as the Federal Reserve revised down 2019 Gross Domestic Product (GDP) estimates by 0.2% to 2.1%. Keeping the slowdown in the US economy and the global ecoonomy in mind, instead of two interest rate hikes this year, it now says its more than likely that there will be none. The Federal Reserve suggests a 0.25% rise in 2020 and none in 2021. The Fed said it intends to stop shrinking its bond portfolio in September, which should help hold down long-term interest rates.

Trade war worries
Worries that the US-China trade talks have hit snags after a halt in negotiations weakened the New Zealand Dollar and Australian Dollar, over concerns that it could hit their economies. However, both sides are set to resume talks in Beijing next week in the hope of reaching a deal.The commodity currencies, in particular, will be keeping a close eye on how the China-US talks progress.

Budget diverts attention in Canada
A Federal budget in Canada temporarily turned the attention away from Canadian Prime Minister Justin Trudeau’s political troubles, following ministerial resignations over the SNC-Lavalin alleged fraud and corruption scandal. But with the Canadian economy struggling, the Canadian Dollar could face testing times ahead.

What to watch out for next?

Asia Pacific
Manufacturing data and new home sales are being announced in Australia next week, while New Zealand releases its 2018 Overseas Merchandise Trade and Business Operations Survey. But the market will also be looking closely at any developments in the resumption of the US-China trade talks.

Following the crucial European Council meeting, it’s a quiet week for European economic announcements. A good job, with all that is going on with Brexit at the moment! The following week brings a whole raft of manufacturign and industry data, so the Eurozone will no doubt be glad of the breathing space.

Brexit, Brexit, Brexit! Need we say more?

Building and housing statistics, including the latest Standard & Poor's (S&P) Home Price Index, are released this week, as are the Balance of Trade figures for January and Gross Domestic Product (GDP) and price growth figures for Q4, 2018. Balance of Trade data will also be released in Canada this week, along with month-on-month GDP figures.


Water Day to remember!
Tomorrow (Friday 22nd March) is World Water Day, so raise a glass to the importance of fresh water for us all! Even if you mix it with something a little stronger!

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