The pound traded a shade higher at $1.2864 after gyrating between a low of $1.2670 and a high of $1.2917 on the previous session.
"While the margin of May's loss was a surprise, the defeat itself was something the market had been pricing in for a long time and it appears that participants covered shorts in the pound after the vote," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
"The market is now factoring in the March Brexit deadline being extended. In the longer run it may boil down to two scenarios - a no-deal Brexit or no Brexit at all."
· The euro was steady at $1.1411 following a loss of 0.5 percent the previous day.
· The dollar was flat at 108.655 yen after advancing 0.5 percent against its Japanese peer overnight amid a further ebb in risk aversion with U.S. stocks posting strong gains.
· The British pound has shown resilience following a crucial U.K. parliamentary vote, but several experts warned that the currency could come under pressure in the months ahead because uncertainties remain on how Britain would leave the European Union.
The pound dropped sharply against the U.S. dollar immediately after the British parliament on Tuesday voted to reject Prime Minister Theresa May’s Brexit plan to leave the European Union. But the currency regained losses to rally against the greenback as traders cut back bets of a hard Brexit.
“We think there’re still a lot of risks out there. Certainly the defeat of May’s proposal yesterday takes away one leg of uncertainty but we still have many others,” Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce, told CNBC’s “Street Signs” on Wednesday.
“If you were to look at the circumstances that we have now: A confidence vote that’s coming up, potentially another referendum, potentially a general election — none of those things are going to endear you to the economy or to the currency at this level, so we think caution is still the best approach, ” he added.
Major wealth managers have also advised clients not to bet on or against the pound given those uncertainties. UBS, in a Tuesday report after the vote, said exposure to pound-denominated assets “should be maintained at benchmark levels until more clarity emerges.”
“At this stage we do not advocate taking directional views on sterling and UK assets,” wrote Dean Turner, economist at UBS Global Wealth Management.
· As the world awaits U.K. Prime Minister Theresa May’s next move after her Brexit deal failed to obtain parliamentary approval, some politicians from the country’s biggest opposition party believe a second referendum is now increasingly likely.
“The critical issue is now that she’s been defeated in the House of Commons, what does Theresa May do and I think, there’s only one way she can really go now — and that’s towards a referendum to give the people a chance to sort out this crisis,” Andrew Adonis, a Labour member of parliament who previously served as U.K. transport minister and education minister, told CNBC on Wednesday.
The opposition Labour Party, which has long advocated for Britain to remain in the European Union, tabled a no confidence vote against May, who is the head of the ruling Conservative Party, on Tuesday after her proposed Withdrawal Agreement lost by 230votes. The deal details how Britain should exit the European bloc by end-March.
Labour leader Jeremy Corbyn is hoping May will lose the leadership vote, which will pave the way for a general election that Labour is likely to win. But many political analysts and some Labour politicians believe May will survive the no-confidence motion, unless Conservative lawmakers vote against their own party lead
· Despite her defeat in the House of Commons, the U.K.’s lower house of parliament, “there is no immediate threat to May’s position,” Mujtaba Rahman, Europe managing director for political consultancy Eurasia Group, wrote in a note. May is expected to remain in power as the Democratic Unionist Party (another opposition group) and the Conservatives who voted against her Brexit deal will support her, Rahman said.
If May survives Corbyn’s no-confidence vote, she will have to put forward an alternative Brexit strategy next week, which will be subject to further debate in Parliament. But because there is no form of Brexit that will be supported by both Conservative and Labour, Corbyn will likely support the idea of a second vote on whether Britain should give up its E.U. membership, according to Adonis.
Another referendum is the “most likely course,” Adonis said. Given how divided parliament is, a referendum is the most realistic option for lawmakers to agree on, as opposed to another Brexit agreement, he continued.
Assuming May wins the no-confidence vote, the big question is whether Corbyn will move forward on a referendum next week or wait until the end of March, Adonis said. He believes the results of a second referendum will overwhelmingly see the U.K. remain in the E.U.
· British lawmakers will on Wednesday vote on whether they have confidence in the government, after Prime Minister Theresa May’s Brexit deal suffered a heavy defeat in parliament.
Labour leader Jeremy Corbyn will open the debate on the motion at around 1300 GMT. May will also speak in the debate and it will last until 1900 GMT.
Lawmakers will then vote on the motion at 1900 GMT, with the result due at around 1915 GMT.
· President Donald Trump tried a new strategy to get his border wall by going around House Speaker Nancy Pelosi, Politico reported. He failed spectacularly.
On Tuesday, Trump invited moderate House Democrats to join him at the White House for lunch to talk about his wall and the shutdown. He used a similar strategy when Paul Ryan controlled the House, going around the speaker to negotiate with the far-right Freedom Caucus. But unlike Republicans, no Democrats attended the lunch meeting, according to White House press secretary Sarah Sanders.
The embarrassing episode shows two things: Democrats are united on shutdown politics and the president is underestimating Pelosi’s hold on her caucus.
· The record-breaking US government shutdown is triggering ripple effects across the US economy and risks denting confidence among companies that have already been fretting about trade disputes and stock market turbulence.
“It [the shutdown] definitely becomes a significant shock if it lasts for months rather than weeks,” said Ethan Harris, head of global economics research at Bank of America Merrill Lynch. “There is a sensitivity in the markets to signs of dysfunction in Washington.”
· The most immediate economic impact will stem from a reduction in work performed by federal employees. In 2013, when more than 800,000 federal workers were furloughed for 17 days, the Bureau of Economic Analysis estimated that real gross domestic product growth was consequently trimmed by 0.3 of a percentage point.
Recently updated estimates from White House economists suggest that the effect of work not being done by 380,000 furloughed federal workers this time around will shave 0.08 of a percentage point off GDP every week the shutdown carries on. In addition, the loss of work done by federal contractors will trim an additional 0.05 percentage point from activity.
· As the shutdown extends further into unprecedented territory, however, the economic effects will become more significant. As analysts at Standard & Poor’s said last week, “the longer this shutdown drags on, the more collateral damage the economy will suffer”.
The indirect effects, which are not captured by narrow economic modelling, include potential lost spending by individuals who are missing paychecks because of the impasse. On top of the 800,000 government workers who are not receiving paychecks, hundreds of thousands of contractors are also being affected.
· The direct and indirect effects from the shutdown could, if it continues through the current quarter, knock about one percentage point from GDP growth, according to BofA, which would lower its forecast for the period to annualised growth of 1.2 per cent. Jamie Dimon, JPMorgan Chase chief executive, this week said the shutdown could drive quarterly growth to zero.
The broader concern is the message the shutdown sends about US politicians’ ability to govern effectively — at a fragile time for sentiment in the US. History suggests corporate and household sentiment will be dented by the impasse: consumer confidence readings dropped sharply in late 2013 because of the 16-day shutdown.
· China’s trade faces rising uncertainties this year, a commerce ministry official said on Wednesday.
Ren Hongbin, an assistant minister at the commerce ministry, made the comment at a news conference.
On Monday, China reported surprisingly poor December trade data, with both exports and imports contracting from a year earlier.
· Three North Korean officials, including the top envoy involved in talks with the United States, are booked on a flight to Washington, Yonhap news agency reported on Wednesday, suggesting a possible breakthrough in denuclearization talks.
U.S. Secretary of State Mike Pompeo and senior North Korean official Kim Yong Chol are expected to meet on Thursday or Friday in the U.S. capital to discuss a second summit between their leaders, CNN and South Korean media reported citing sources familiar with the issue.
· The Bank of Japan is expected to cut its inflation forecasts at next week’s rate review, sources say, a sign slumping oil prices and a darkening global economic outlook are heightening challenges for hitting its ambitious 2 percent target.
But the BoJ is likely to maintain its upbeat assessment that Japan’s economy will keep expanding moderately as global growth is expected to emerge from a soft patch later this year, the sources familiar with the central bank’s thinking, told Reuters.
· The U.S. Energy Information Administration said on Tuesday, in its first 2020 forecast.
With so much uncertainty around demand and supply, the outlook for oil markets is unclear.
Oil prices are expected to oscillate close to current levels, according to a large annual survey of energy professionals conducted by Reuters between Jan. 8 and 11, with Brent prices in 2019 expected to average $65 per barrel, unchanged from surveys in 2016, 2017and 2018.
“The oil market remains amply supplied and prices are set to trade rangebound,” Ruecker said. “Softening demand makes too-high prices short-lived ... Similarly, (supply) cuts and slowing shale output make too-low prices short-lived.”
· Oil prices were steady on Wednesday as signs of a global economic slowdown were countered by OPEC-led supply cuts which helped support Brent crude futures above $60 per barrel.
International Brent crude oil futures were at $60.66 per barrel at 0444 GMT, 2 cents above their last close.
U.S. West Texas Intermediate (WTI) crude futures were flat from their last settlement, at $52.11 a barrel.
"Fundamentals offer no clear price direction," said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.
· CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are treading water below minor resistance at 53.39. A break above it exposes the 54.51-55.24 area, followed by the next upside hurdle at 59.05. Alternatively, a daily close back below the 49.41-50.15 zone opens the door for a retest of the 42.05-55region.
Reference: Reuters, CNBC, Financial Times
Thai
Eng