Article Highlights

  • Draghi: Priority in euro area to address weak productivity growth
  • U.K. PM May gets green light to invoke Article 50 from Parliament
  • Scottish First Minister Sturgeon called for second independence referendum
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There wasn’t much going on in the U.S. economic calendar so New York session traders turned their attention to the developing stories in Europe.

Major Events:

Draghi’s testimony – After starting a strong euro rally last week on not-so-dovish remarks in the ECB presser, Governor Draghi grabbed the mic for another speech this week. Most traders had been hoping to catch more fireworks from his remarks so many were probably disappointed that the central bank head honcho didn’t have anything else to say on monetary policy.

Instead, Draghi talked about the pressing need to address weak productivity growth in the euro area. He mentioned that there has been some progress in innovation but that more needs to be done to facilitate the spread of new technology from those in the lead to those lagging behind. In doing so, this could boost productivity in the region and foster a more optimistic outlook.

PM May gets green light for Article 50 – In the latest turn of events, the U.K. House of Commons rejected amendments from the House of Lords to give lawmakers more say in the final Brexit deal. As a result, Parliament was able to pass legislation that would allow Prime Minister May to invoke Article 50 within her timeline by the end of this month.

“Parliament has today backed the Government in its determination to get on with the job of leaving the EU and negotiating a positive new partnership with its remaining member states,” remarked Brexit Secretary David Davis in a statement. “We are now on the threshold of the most important negotiation for our country in a generation.”

With fewer roadblocks ahead, the U.K. government has practically free reign in negotiating the breakup with EU leaders. Prime Minister May will address the House of Commons this week, probably dropping some hints on their negotiation game plan.

Sturgeon calls for second Scottish referendum – The Scots are at it again! After failing to get an independence bid in their referendum a few years back, Scottish First Minister Nicola Sturgeon confirmed that she will push for another nationwide vote to be held in the latter half of 2018.

In particular, Sturgeon said that she will seek permission from Parliament by Tuesday next week for a Section 30 order from the U.K. government, which would call for a legally-binding referendum on independence. Keep in mind, though, that this coincides with U.K. PM May’s already busy schedule in terms of prepping for EU negotiations so she might not be open to the idea of more drama in the region.

Major Market Movers:

GBP –  Even with all the uncertainties in the U.K., the pound managed to hold its ground and look forward to the Brexit negotiations.

GBP/USD continued its climb from earlier in the day to a high of 1.2251, GBP/JPY bounced from 139.84 to a high of 140.50, EUR/GBP is down from .8743 to a low of .8709, and GBP/AUD edged up from 1.6108 to a high of 1.6148.

Watch Out For:

  • 2:00 am GMT: Chinese industrial production y/y (6.2% expected, 6.0% previous)
  • 2:00 am GMT: Chinese fixed asset investment ytd/y (8.2% expected, 8.1% previous)
  • 2:00 am GMT: Chinese retail sales y/y (10.5% expected, 10.9% previous)

See also:

London Session Recap

Asian Session Recap

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