Daily Market Update

March 29: Brexit day? Nope

March 29, 2019

The U.S. Dollar looks to end the quarter on its front foot.

Overview

The Bloomberg Dollar Index is up and is headed for its best week in nearly two months. Overall the gauge is set to close the quarter higher for the fourth consecutive quarter as the greenback continues to win the “less ugly” contest.  The Federal Reserve took a sharp dovish turn to start the year which would have generally weakened the dollar but events abroad and warning signs of a possible recession in the U.S. and global slowdown have boosted the safe-haven.

The Australian and New Zealand dollars are ticking higher this morning on positive headlines surrounding possible progress in trade talks between China and the United States.  If past is prologue, we will take the headlines with a grain of salt.

This morning’s economic docket will not do the greenback any favors.  U.S. consumer spending fell short of expectations in January, registering only 0.1% and last month’s reading was also downwardly revised. Personal Income also slipped.  A separate report showed that the Fed’s favorite gauge for inflation dipped lower, bolstering the case that rates will not rise again this year.  Indeed, there is now a 70% chance that the Fed will find the scope to cut rates by the end of the year.

 

What to Watch Today…

  • Brexit Vote later today
  • University of Michigan Consumer Sentiment at 10 AM

Complete Economic Calendar can be found here.

 

GBP

The British pound continued to drop overnight and has fallen nearly two percent since late Wednesday.  However, the sterling is attempting to recoup some of its losses in early trading.  All eyes will remain on Parliament today as Theresa May attempts to pass her Brexit bill for the third time.  It is unlikely that May will succeed as there is still considerable opposition to the Irish backstop. If the vote fails, expect May to threaten a long extension which would increase the chances of a second referendum or possibly even a cancellation of Brexit.  GBP/USD will remain subject to headline risk.

CAD

The Canadian dollar is the biggest mover this morning, gaining against its American counterpart after a report showed better-than-expected GDP.  The Canadian economy expanded 0.3% in February, beating estimates of a 0.1% growth.  The Canadian dollar has gained over half a percent in the minutes following the GDP release and will look to continue its momentum as oil ticks slightly higher.

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