Time running out for May


The Dollar Index nursed a minor decline this morning although has maintained the 97.0 handle. The index touched a near three-week high on Friday at 97.27 after Michigan Sentiment and new home sales surpassed expectations. There was minimal reaction meanwhile to a slight downward revision to Q4 GDP on Thursday.

Retail sales for February came in short of expectations at -0.2% vs. 0.3% and ISM manufacturing beat forecasts of 54.5, coming in at 55.3. Durable goods follow tomorrow before the nonfarm payrolls on Friday.


Will we finally find out how Brexit will happen this week?

Out of all the difficult weeks faced by Theresa May, this one looks to be the trickiest yet. She will most likely have another go at getting her meaningful vote through parliament in the coming days, if the speaker allows it. If it fails, MPs will most likely attempt to force a softer Brexit with a customs union – potentially trying to make it enforceable through legislation as soon as Wednesday.

Is Theresa May’s deal dead?

It is almost dead but not quite. The Prime Minister is still hopeful that more Conservatives and even the DUP could be induced to back it for fear of the alternative – a general election at a time when polls show Jeremy Corbyn is within grasp of Downing Street. There will be a huge effort by No 10 to pitch the vote as one between May’s deal and a softer Brexit or potentially a general election. However, she needs at least 30 Conservative, DUP or Labour MPs to come on board to avoid plunging the government into an unprecedented paralysis.

Will parliament seize control?

Yes – they have done so this evening. 322 vs 277 approved indicative votes just before 5pm. Now we’ll find out which motions will be called. They are trying again to find a majority for a Brexit with a customs union, possibly with a second confirmatory referendum tacked on to it, once the choices are narrowed down. The vote could be swung if the SNP decide to get behind a soft Brexit rather than sticking to their preference for another referendum. If May’s deal fails and MPs reach a verdict, they could seek to start passing legislation to make it legally binding on Wednesday, meaning there is a chance the government would have to go back to Brussels to renegotiate. This would trigger a crisis in the Conservative party, with a majority of its MPs preferring no deal to a softer Brexit.

Is no deal finally off the table?

It depends if MPs can legislate for another option. If not, May could simply run down the clock until April 12, which would please the 170-plus Conservative MPs – more than half the party – who urged her in a letter to take this course. However, David Gauke, her justice secretary, said yesterday that was not an option she was prepared to take and it would spark cabinet walkouts from soft Brexit ministers, potentially causing her government to fall.

Will there be a general election?

No 10 is threatening this as an option if May’s deal fails and there is no consensus among MPs. However, parliament would have to vote for it first by a two thirds majority and there is little appetite for this among Conservatives given their plunge in the polls this week. It could also happen if there was a successful no-confidence motion in the government, but there would first be a 14 day period during which MPs would scrabble to see if they can put together an alternative government.

With a number of different outcomes possible, please speak with your relationship manager to discuss Brexit in more detail.

Manufacturing PMI out this morning jumped to 55.1 against a forecast of 51 while service PMI follows on Wednesday.


EUR/USD is little changed today having touched a three-week low on Friday at 1.1210. Weaker-than-expected Euro Zone manufacturing PMI released this morning will have limited any upside while investors will be on the lookout for further details regarding a possible tiered deposit rate at the ECB.

Euro Zone PPI is due for release tomorrow and service PMI and retail sales are out on Wednesday.


The Japanese Yen has seen a soft start to the week, weighed by the positive risk tone and soft Tankan data released overnight. USD/JPY touched a daily high of 111.19 overnight, its highest level since March 20th.

Data releases are limited for the rest of the week. Average earnings are out on Thursday while the leading economic index follows on Friday.


EUR/CHF touched a daily low of 1.1160, its lowest level since July 2017 although has seen a modest bounce today as the Franc declined. Weaker-than-expected retail sales played their part although a lack of safe-haven demand is the more prominent factor as European cash equity markets opened higher.

March CPI data is due tomorrow.


The Australian Dollar was the strongest G10 currency this morning, boosted by renewed trade optimism amid reports of ‘new progress ‘in US-China trade negotiations. Investors will also have taken note of the stronger-than-expected Chinese PMI data released overnight.

The RBA policy decision tomorrow will be the main focus for investors this week. Trade data and retail sales are out on Thursday.


The Canadian Dollar rose sharply on Friday following stronger-than-expected monthly GDP data. USD/CAD dropped to a one-week low of 1.3342 and extended below by a few pips this morning as high oil prices provide support for CAD.


The Swedish Krona rose slightly this morning, boosted by a broadly positive risk tone in Asia and Europe. EUR/SEK is still above Friday’s seven-week low at 10.3915. Recent appreciation in the Krona has been linked to the Riksbank as policymakers continue to play down soft inflation data. Swedish Retail sales also surprised to the upside on Thursday.

Service PMI data is due for release on Wednesday.


The Norwegian Krone has begun the trading week on the front foot, tracking gains in the oil markets with US crude futures adding around 0.8% at the highs. Still, EUR/NOK has failed to break below Friday’s low at 9.6551.

Domestic impulses were largely negative last week, including retail sales and unemployment data which both missed forecasts. House price data is due on Wednesday ahead of manufacturing production on Friday.

To discuss currency risks that may affect your business in 2019 and 2020, please call us on 020 3876 5432 for a free consultation now.