Not a good turn of events for Sterling bulls this week as Brexit developments turn sour, prompting the British pound to take last place among the majors for the week.
United Kingdom Headlines and Economic data
- May accused of ‘bribing’ MPs with £1.6bn fund for deprived towns
- Signs of pro-Brexit lawmakers are softening demands of PM May
- UK construction activity falls for first time in 11 months – PMI
- UK Sales Growth Slows In February As Brexit Looms
- Labour party’s finance spokesman was quoted as saying few lawmakers would back Prime Minister Theresa May’s Brexit deal
- Difficult’ Brexit talks see no breakthrough, European Commission says
- Theresa May clashes with Corbyn at PMQs as EU officials reveal dire state of negotiations
- Brexit meaningful vote will go ahead, says No 10, despite talks stalling
- No progress on Theresa May’s deal as Michel Barnier negotiations fall flat just six days before key Commons vote
- Halifax price index shows house prices in three months to February were 2.8% higher that price three months
- Bank of England’s Saunders sees no rush to raise rates amid Brexit unknowns
- EU awaits reworked UK Brexit proposals, deal remains elusive
- Theresa May says Brexit ‘may never happen at all’ if MPs reject her deal again
- ‘Brexit in peril’ as May faces heavy defeat
Major Market Drivers for the British Pound
We had a very light economic calendar from the U.K. this week, and touching on the economic updates very quickly, we think the data points painted a mixed picture with a net negative read on the economy. The weak construction activity (contractionary at 49.5) and retail sales update (-0.1% vs. 1.8% previous) likely outweighed the uptick in the services sentiment survey (51.3 vs. 50.1 previous). This likely had some role to play in Sterling’s weakness this week.
But after looking through the headlines above, it appears that Brexit updates were theme for this week as more failed negotiations between the U.K. government and the EU likely put pressure on Sterling. After a positive start to the week on signs of pro-Brexit lawmakers are softening demands of PM May, it was all downhill from there when EU officials started putting out negative comments on the progress of negotiations.
With no new deal with the EU after another laborious round of negotiations, it’s likely traders began selling pounds Thursday and Friday on the notion that Theresa May’s deal will likely once again be rejected this coming Tuesday, keeping the level of uncertainty high on what the Brexit outcome will be, whether it’s a no-deal exit, extension, or a new referendum vote on Brexit.
Sterling pairs price action was mixed throughout the week on counter currency catalysts and risk-off leaning global sentiment, but this late week push lower was enough to put all Sterling pairs into the red and take the biggest loser crown against the major currencies.