Morning Commentary: If At First You Don’t Succeed, Try, Try, Try Again

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

If At First You Don’t Succeed, Try, Try, Try Again Share this story: Andrew Kositkun Foreign Exchange Head Trader

The U.K. parliament is expected to hold another series of votes on Brexit this week.  PM May is expected to bring another "meaningful vote" on her Withdrawal Agreement (WA) by Tuesday, March 12.  It's been reported that some members of Parliament have asked PM May to pull the "meaningful vote" as it is likely, if not expected, that PM May will be defeated by a historic margin for a second time as there has not been any material progress from the first WA agreement that May put up for a vote.    If the "meaningful vote" fails again, the House of Commons will need to vote on a "no-deal" Brexit on Wednesday, March 12.  This vote is expected to be blocked by MPs, setting the stage for a vote on extending Article 50 (Brextension) on Thursday, March 14.  To the extent that market pricing is an accurate predictor of the future, a Brextension is currently seen as the most likely outcome.   Given the market's expectation for a Brextension, the realization of this should only lead to a modest rally for the GBP.  However a longer extension that raises the possibility for a second referendum would lend scope for an even larger rally.  Moreover, market focus should then shift to the EU summit on March 21 as market participants search for a definition over the length of the extension.  In the case that all three votes fail, the markets should initially react sharply, with volatility spiking higher on the increased fear of a no-deal result.  However, we would ultimately expect the market's direction to be determined by its interpretation of the UK's political landscape and whether it favors a hard Brexit or a second referendum.         HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: Fed Chairman Powell gave a wide ranging interview on 60 Minutes last night.  In his interview, Chair Powell indicated that there was a clear time limit to the Fed's current pause in interest rates as well as indicated that the Fed would not "overreact" to inflation moving modestly above 2%.  U.S. retail sales came in better than expected, rising 0.2% against expectations for a 0.0% rise.  This stabilization in retail sales followed a 1.6% decline last month.  This stronger than expected report should help ease some concerns over the surprisingly weak December print.           China's annual National People's Congress (NPC) kicked off last week with Chinese Premier Li Keqiang sending a message of balance growth and stable levels of debt.  He also made the case against "flood like" stimulus.  For this week, the NPC is expected to address new foreign investment laws that could allow full ownership in more industries, provide better protection to foreign investors and will explicitly make forced technology transfers illegal—all key US concerns in the ongoing US-China trade talks.

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