Britain's relationship with Europe in the balance

3 minute read


The dollar was mostly out of the game again on Monday. There were no domestic ecostats of any note and no developments regarding trade or the government shutdown, other than the president buying burgers for his college football guests because the White House caterers are furloughed.

During the New York session and beyond the USD was roughly steady against its peers. As Europe got going this morning it headed higher, most notably against the Europeans. 


There was more to be seen on the ecostat front from the euro zone but not much more. Pan-Euroland's trade surplus widened in November to a seasonally-adjusted €15.1bn. National statistics showed French inflation slowing from 2.2% to 1.9% while in Spain it was steady at 1.2%. Germany reported that its economy grew by 1.5% in 2018, in line with forecasts but appreciably less than the 2.2% it achieved in the previous year.

Ahead of London's opening the EUR went into retreat, dropping half a cent in two hours. It is 0.3% lower on the day.


Oil prices went nowhere on Monday and the same was true of the CAD. It was precisely unchanged on the day against the USD.

There was a severe shortage of Canadian economic data. The only figures on offer were to be found in Teranet's house price report. The index fell 0.3% in December, leaving prices 2.5% higher on the year. 


Sterling had another good day, at least during the New York session. However, it gave up most of its gains in early Europe this morning, such that the GBP is only 0.3% ahead on the day.

The pound now awaits an important vote in the House of Commons later today. Parliament will be asked to approve the EU withdrawal bill that has been tortuously constructed over the last two years. And the likelihood is that approval will not be forthcoming. The word on the street is that the government could lose by 200 votes or more. If that were to be the case the question would be what happens next? At the least, Britain's departure from the EU would probably have to be postponed beyond the due date of 29 March. It would mean a new period of uncertainty which, at least initially, would in turn mean a new period of difficulty for the GBP.


The trajectory of the yen was almost a mirror image of the Europeans. It weakened steadily during the NY session and perked up ahead of, and through, London's opening. The JPY's net loss for the day was 0.4%.

The only Japanese data were for money supply and machine tool orders. The former expanded by an on-target 2.4% in calendar 2018 while the latter continued to decline, down by 18.3% on the year.

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