· The U.S. dollar gained on Thursday for the first time in a week, albeit modestly, as the pound stalled at lower levels ahead of a vote to extend Britain’s March 29 deadline for exiting the European Union.
The pound was down 0.54 percent at $1.3266 in afternoon American trade as Prime Minister Theresa May piled pressure on rebel lawmakers on Thursday to back her battered European Union divorce deal as parliament prepared to vote on seeking a delay to Britain’s departure that could ultimately derail the process.
· A day earlier, the British currency soared nearly 2 percent and reached nine-month highs after lawmakers voted against a potentially disorderly “no-deal” departure from the EU.
Analysts cautioned against putting large positions on sterling due to lingering uncertainty about Brexit.
· “With the uncertainty around (Brexit), it’s not a time ... to take sizeable positions. The risk/reward still favors waiting for some clarity,” said Charles Tomes, senior investment analyst at Manulife Asset Management.
· The dollar index, a gauge of its strength against six other major currencies, was up 0.22 percent at 96.757. It had fallen overnight, at one point brushing a nine-day trough of 96.385.
· As U.K. Prime Minister Theresa May's proposed Brexit deal continues to face a pummeling in Parliament, the only option is to return the matter to the British public for a second referendum, according to Drew Hendry, a U.K. member of parliament from Scotland.
Hendry on Wednesday joined the chorus of parliamentarians calling for more time before Britain's looming departure from the European Union.
"There needs to be a situation now where there's an extension to Article 50 to allow this to go back to the people," Hendry told CNBC's "Squawk Box" Wednesday. Article 50 refers to the formal two-year process governing the U.K.'s departure from the European Union.
If the extension goes ahead, that could open up the possibility of a second Brexit referendum, a prospect that worries Brexit supporters.
However, Hendry said it was necessary to guarantee the best outcome — especially for Scots, who he said would be "disproportionately affected" by Brexit. Scotland voted to remain in the EU by a majority of 62 percent.
"All of the versions of Brexit bring deep economic harm in their wake to our people, and that disproportionately affects Scotland," said Hendry.
· U.K. Prime Minister Theresa May hopes it will be a case of third time lucky next week, when the embattled Conservative Party leader brings her Brexit deal to Parliament yet again.
May has already warned MPs (Members of Parliament) that if her deal fails to get enough parliamentary support, a lengthy delay to the Brexit process might be necessary.
No date has yet been scheduled for the third so-called “meaningful” vote. However, the government motion states it must take place before March 20.
“If (a third meaningful vote) passes, the government would request an extension of Article 50 until 30 June to implement the deal. Alternatively, the motion suggests a longer extension would be necessary and EU elections would need to be held,” analysts at Citi said in a research note published late Wednesday.
“Theresa May’s hope might be that the prospect of a long extension gets the ERG and DUP to vote for the deal,” they added, referring to the Northern Irish Democratic Unionist Party — which props up the government in Parliament — and a group of pro-Brexit lawmakers in the Conservative Party.
· The current deal struck between Brussels and London over Britain’s exit from the European Union is the only one available, the EU’s chief Brexit negotiator said on Thursday.
“If the United Kingdom still wants to leave the European Union and if it wants to leave in an orderly manner, which is what the prime minister says, then this treaty, such as it is, which organizes the orderly separation, this treaty is the only one possible and available,” Michel Barnier said, holding up a copy of the withdrawal treaty that has been rejected twice by Britain’s parliament.
· President Donald Trump said Thursday the U.S. will probably know in the next three or four weeks about a possible trade deal with China.
"One way or another, we're going to know over the next three to four weeks," Trump said in remarks during a St. Patrick's Day reception from the White House's East Room.
The president also said China has been very responsible and very reasonable.
On Wednesday, Trump said he was in "no rush" to complete a trade deal with China. The world's two largest economies have been in a trade war over the past year.
· A summit to seal a trade deal between U.S. President Donald Trump and Chinese President Xi Jinping will not happen at the end of March as previously discussed because more work is needed in U.S.-China negotiations, Treasury Secretary Steven Mnuchin said on Thursday.
· The number of Americans filing applications for unemployment benefits increased more than expected last week, suggesting the labor market was slowing, but probably not to the extent implied by a near-stall in job growth in February.
While other data on Thursday showed import prices rising by the most in nine months in February, the trend in imported inflation remained weak. Import prices dropped on a year-on-year basis for a third straight month in February.
News on the housing market remained downbeat, with new home sales falling more than expected in January. The stream of data remains broadly supportive of the Federal Reserve’s pledge to be “patient” before raising interest rates further this year.
· “If the Fed is reading the tea leaves the economic brew of data are distinctly on the weak side today, and will keep Fed policy cemented in place at next week’s meeting,” said Chris Rupkey, chief economist at MUFG in New York.
· Fed officials are scheduled to meet next Tuesday and Wednesday to decide on monetary policy. The U.S. central bank increased borrowing costs four times last year.
· Initial claims for state unemployment benefits rose 6,000 to a seasonally adjusted 229,000 for the week ended March 9, the Labor Department said. Economists polled by Reuters had forecast claims rising to 225,000 in the latest week.
· Sales of new U.S. single-family homes fell more than expected in January, suggesting the housing market weakness persisted early in the first quarter, despite a moderation in mortgage rates.
The Commerce Department said on Thursday new home sales declined 6.9 percent to a seasonally adjusted annual rate of 607,000 units. December’s sales pace was revised higher to 652,000 units from the previously reported 621,000 units.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They fell 4.1 percent from a year ago. Affordability remains a challenge, especially at the lower end of the market, even as mortgage rates have dropped from last year’s highs and house price inflation has slowed.
· Economists expect the housing market, which hit a soft patch last year, to remain sluggish through the first half of 2019. Investment in homebuilding contracted 0.2 percent in 2018, the weakest performance since 2010.
· The U.S. Federal Reserve could announce plans to stop shrinking its bond stockpile as early as next week and as late as June, Pacific Investment Management Co (Pimco), which oversees more than $1.66 trillion in assets, said on Thursday.
The U.S. central bank meets on March 19-20 and is expected to again signal its intention to be patient before deciding whether to hike interest rates again. The Fed has been reducing the size of a bond portfolio it built up to stimulate the economy in the aftermath of the financial crisis.
The Fed’s assets surged to more than $4.5 trillion, but holdings now stand just under $4 trillion because the central bank stopped reinvesting some proceeds.
Pimco suspects Fed officials will announce that they are beginning to reinvest all the proceeds of their Treasury and mortgage-backed securities back into Treasuries and let reserves very slowly decline as currency in circulation grows, said Dan Ivascyn, group chief investment officer, and Tiffany Wilding, U.S. economist, at Newport Beach, California-based Pimco.
· Japanese Finance Minister Taro Aso on Friday warned the central bank against insisting it achieve its elusive 2 percent inflation target.
“Things could go wrong if (we) insist too much on achieving the 2 percent inflation target,” Aso told reporters after a regular cabinet meeting.
“No one in the public would be angry even if the inflation target isn’t achieved,” Aso said, when asked about his comments in parliament on Tuesday that the BOJ could give itself more flexibility in how it defines its price goal.
· The Bank of Japan is likely to stand pat on monetary policy on Friday but temper its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery.
Factories across the globe slammed on the brakes last month as demand was hit by the U.S.-China trade war, slowing global growth and political uncertainty in Europe ahead of Britain’s departure from the European Union.
Such weak signs have forced major central banks to pause in raising interest rates and cast doubt on the BOJ’s repeatedly-stated assessment that overseas economies “continue to grow steadily”.
· Oil prices were mixed on Thursday after hitting 2019 highs as OPEC stressed the need to extend its production cut program past June while lowering its forecast for crude demand.
Uncertainty over the progress of U.S.-China trade talks and global economic growth weighed on oil prices.
Brent crude hit a four-month peak of $68.14 per barrel before falling to $67.19 by 2:23 p.m. EST (1823 GMT), down 36 cents, from Wednesday’s close.
U.S. West Texas Intermediate crude futures edged up 29 cents to $58.55.
Reference: CNBC, Reuters, Investing
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