All eyes and ears are on the Brexit vote this week as the outcome would decide the U.K. economy’s fate for years to come. Here’s what to expect.
Parliament Brexit vote (Jan. 15)
It’s D-day (again) for Brexit as the House of Commons is scheduled to vote on the Withdrawal Bill sometime during Tuesday’s London session.
Everyone and his momma seem to be expecting a crushing defeat for PM May’s plan, with the BBC projecting as many as 433 MPs will vote against the bill and 206 in favor of it.
Note that No. 10 has a speech scheduled a day before the vote, and some predict that she might pull the vote again at the last minute. If not and the bill winds up getting rejected, the next options might be for the U.K. government to pursue another attempt at fixing the deal or just back out of Brexit.
Oh, and there’s the chance that they end up in a “no deal” situation, too! Exciting times!
U.K. officials might be keen to avoid a “no deal” outcome as this would bring in a lot of uncertainty for businesses and the economy as a whole. In any case, be on the lookout for additional pound volatility as developments unfold.
BOE Governor Carney’s speech (Jan. 16, 9:15 am GMT)
As the dust (hopefully) settles on Brexit mid-week, BOE Governor Carney might be able to shift the focus back to economic data and policy with his testimony on the Financial Stability Report before the Treasury Select Committee.
Then again, recall that this particular report wasn’t exactly very chipper about what might happen in the post-Brexit world. Instead it painted a rather bleak picture, projecting that a disorderly Brexit could spur an 8% slump in GDP and a whopping 25% drop in the pound’s value.
While Guv’nah Carney was quick to explain then that a disruptive or disorderly Brexit aren’t likely to happen, the situation may be a wee more different this time around.
U.K. inflation reports (Jan. 16, 9:30 am GMT)
The U.K. is due to print its inflation readings a few minutes into Carney’s testimony. Depending on what he has to say, these figures might not rouse as much as attention as they used to.
Still, the numbers are worth keeping tabs on since the BOE’s next moves are dictated by price pressures. Headline inflation could slip from 2.3% to 2.1% for December while the core reading could hold steady at 1.8%.
Underlying data could also provide some insight on future price levels. The retail price index, which tracks goods purchased for consumption, is slated to slide from 3.2% to 2.9%. PPI input prices could a 1.7% slide, following the earlier 2.3% decline.
U.K. retail sales (Jan. 18, 9:30 am GMT)
Before the week comes to a close, the U.K. will also release its latest retail sales report. A decline of 0.8% is eyed for December after the earlier 1.4% gain, although there could be room for an upside surprise from seasonal holiday spending.
But as in the inflation reports, this particular release might be shrugged off by pound traders as Brexit could steal the forex show.
Last Week’s Price Review
The British Pound
Exciting week for Sterling traders as Brexit headlines have GBP pairs trading in a two way market and ending the week as a net winner.
Major Market Drivers for the British Pound
For the British pound, there’s no other catalyst that usually has Sterling moving other than what else…Brexit! And this week was no different with this round of Brexit headlines on a negative tilt before a controversial report to close out the week.
Sterling price action started off mixed on Monday and didn’t really get into uniform moves until Tuesday after news comes out that parliament will vote on the government’s deal to leave the European Union on January 15.
From there, sentiment grew that British PM Theresa May will likely lose the U.K. parliamentary vote on her Brexit deal as she continues to have trouble finding support after suffering an early defeat this week and parliament demanding a plan-B Brexit deal within days if she loses next week’s vote.
But it was not all gloom and doom for Sterling as forex traders momentarily focused on Fed speak on Wednesday, reiterating patience on rate hikes and concerns of recession, seemingly giving the pound a boost across the board on USD weakness.
Thursday was a mixed bag once again, even after Labour leader Jeremy Corbyn calls for a general election vote if the Brexit deal isn’t voted on by parliament, but uniform price action returned once again on Friday after news came out that the Brexit date could be delayed. This report was rejected by a spokesperson for British PM May, but it already sent the pound rocketing higher to help Sterling close on the week higher against the major currencies, with exception to this week’s winners in the Aussie and the Kiwi.
United Kingdom Headlines and Economic data
- May to pitch more Brexit ideas as she seeks EU help
- UK’s Brexit vote planned for Jan. 15, no plans to delay EU exit
- As Brexit debate begins, PM fails to win over Northern Irish kingmakers
- Car industry malaise drags down UK GDP growth to 0.3%
- Brexit: Theresa May considering Labour MP’s demands on workers rights
- May pressing talks with EU to get Brexit assurances
- Sterling pushes higher on report that Brexit date could be delayed
- Juncker hints at helping out Theresa May over Brexit deal