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Macro Brief: Brexit soap opera continues Macro Brief: Brexit soap opera continues Macro Brief: Brexit soap opera continues

Macro Brief: Brexit soap opera continues

Macro 2 minutes to read
CD
Christopher Dembik

Head of Macro Analysis

Summary:  The ongoing Brexit saga has offered a great deal in the way of political spectacle, but little overall direction.

Without much surprise, UK Prime Minister May suffered another humiliating defeat yesterday. Northern Ireland's DUP and the Brexit-supporting ERG group did not back the deal negotiated by the government considering that changes do not deliver (1) legally binding changes to the withdrawal agreement and (2) an exit mechanism from the backstop.

In addition, US inflation was out lower than expected (both headline CPI and core CPI) which was considered by forex investors as mildly dollar-negative since it broadly reduces pressure on the Federal Reserve to normalise monetary policy.

Today’s focus will be on Brexit again as the Parliament is expected to vote on whether to leave the European Union with no deal, which will likely be rejected as well. Then, MPs will vote on whether to seek an extension of Article 50, which will probably pass on Thursday. It does not mean that the Brexit soap opera will end anytime soon since PM May will need to go back to Brussels to ask the EU-27 for an extension, which is not a done deal.

In other words, the GBP should see a choppy ride in the coming days. Today, EU ambassadors should also discuss Brexit in Brussels. Elsewhere, one of the most important data releases will be US construction spending in January. Consensus expects an increase of 0.4% versus -0.6% prior. This good figure should mostly result from an increase in nonresidential construction while private residential construction is expected to continue declining.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, or any of our other products work, and whether you can afford to take the high risk of losing your money. The value of your investments can go down as well as up. Losses can exceed deposits on some margin products. Professional clients can lose more than they deposit. All trading carries risk.

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