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FCP Daily Market Update

10 Dec 2018

Sterling
Uncertainty over tomorrow’s parliamentary vote on PM May’s Brexit plan has continued to plague sterling. Even with an ECB policy meeting on tap, the vote is likely to be the biggest event risk of the week. A government defeat and further resignations remains a very likely scenario. Sterling ended last week on the back foot and looks set to begin the new one in the same vein.

Euro
The euro was sidelined on Friday as attention was firmly on the US jobs report. With the report disappointing, the euro made some headway against the dollar but closed well off its highs. Elsewhere, broad-based sterling weakness saw the single currency close at its highest level since late September.

US dollar
Friday’s labour report from the States will have done little to boost investor confidence that the Fed will continue with multiple rate hikes next year. Slowing job growth and soft monthly average earnings are compounded by the decline in equities which will likely see companies remain cautious on hiring. Even expectations for a hike this month are being pared back and St Louis Fed President Bullard was typically dovish in calling for rates to remain unchanged. Fears also remain over the progress of trade talks with China which is also denting confidence in the dollar.

Data and events
GDP, production and trade figures are today’s primary releases but it will be difficult for those to steer attention away from tomorrow’s parliament vote and headlines on this topic are more likely to be the driver of sterling fortunes. Away from data, the European Court of Justice will rule on whether the UK could remain in the EU if the plug were to be pulled on Brexit.

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