Another decision day for Brexit

3 minute read


The Justice Department has charged Huawei, a Chinese tech company, with bank fraud, obstruction of justice, and conspiracy to launder money. For good measure, CFO Meng Wanzhou has also been charged and her extradition from Canada is sought. To investors hoping for a good outcome to the trade talks between Washington and Beijing, the timing of the announcement must look unfortunate.

As far as the USD was concerned, investors found it difficult to judge whether a breakdown in trade negotiations - were that to happen - would be positive or negative. Economically it would be bad, because of the implicit decline in trade, but emotionally it could encourage investors to seek the perceived safety of the USD. They could come up with no clever answer on Monday and the dollar was on average unchanged.


Things went little better for the euro, which strengthened by 0.3% against the USD. It continued to benefit from the better-than-expected lending and money supply data and the European Central Bank president was less downbeat than he had sounded at his last outing. Speaking to members of the European parliament he said that "softer external demand" was partly to blame for the recent slowdown in Euroland, and that the situation was not serious enough to require fresh action by the ECB.

This morning's ecostats, few though they were, tended to be helpful to the EUR. Consumer confidence in France improved by five points to 91 and Spanish unemployment edged down by 15 basis points to 14.45%. 


Increased nervousness about the Sino-American trade talks had a dampening effect on all the commodity-related currencies. The Loonie was fortunate that oil prices were unchanged on the day, though it encountered some buffeting along the way as WTI fell, then recovered.

There were no Canadian economic data on the agenda so investors had to make what they could of the oil price and the sensitivities surrounding the Huawei affair. They evidently has no idea what to do: the CAD is all but unchanged against the USD.


The only item of any remote promise on sterling's agenda was an appearance by Bank of England governor Mark Carney. In the event, he had no impact on the GBP. He was taking part in a seminar about the future of money and did not touch on policy.

Investors busied themselves speculating about today's important Brexit-related votes in the House of Commons but that was all they could do: speculate. It will not be known until later today exactly which motions have been selected by the speaker of the house. One of them is likely to involve demanding that the EU abandon its insistence on the "backstop" involving the Irish border: another will probably seek to give parliament the power to postpone Brexit to avoid a no-deal departure. What can be reasonably assumed is that outcomes pointing to delays and a "soft" Brexit would be better for the GBP. It edged lower on Monday as investors tidied up ahead of the voting.


The yen suffered another day of stasis, with no Japanese data to arouse investors and no events serious enough to spark a flight to or from safety. It might see some movement if tonight's retail sales figures differ widely from the forecast monthly increase of 0.4% but that is unlikely.

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