It plays into the British sense of delusions of grandeur when it seems as though a major factor driving risk appetite is the Brexit progress (or lack thereof). Market sentiment has been hit as UK Prime Minister Theresa May lost her latest attempt to get her Brexit deal past Parliament. The result is a heightened sense of uncertainty for any markets of UK assets and gives an excuse for traders to sit with caution once more. However there is another vote in Parliament today which could at least help to improve sentiment once more as MPs decide on whether to reject the prospect of a hard, “no deal” Brexit. If this is seen then the avenues towards a softer and more market friendly form of Brexit (or perhaps no Brexit at all). Disruption and uncertainty of a no deal Brexit do not sit well with broad risk appetite. However, softer Brexit options are sterling supportive and it is interesting to see Cable holding on to $1.3000 amidst all the huge volatility yesterday, whilst pushing ahead this morning. As for Mrs May herself, she limps on as Prime Minister, for now. Under normal circumstances, a second enormous defeat of a Government key piece of legislation would be terminal for a PM, but under Brexit, normality flew out the window long ago. Outside of the UK, the mild miss on US CPI has taken further wind out of the sails of the dollar bulls. This has helped to drag gold into the long term key pivot band $1300/$1310 and EUR/USD back towards $1.1300 (also a key pivot area). So the dollar is at something of a crossroads.
Wall Street was mixed last night with the S&P 500 +0.3% at 2791 and the Dow -0.4% on continued selling pressure for Boeing, whilst US futures are flat today with traders looking cautious. Asian markets have reflected this with the Nikkei -1.0% and Shanghai Composite -1.1%. In Europe, markets are looking at a slightly lower open too, with the FTSE futures and DAX futures both around -0.3% lower. It will be interesting to see if the negative correlation of FTSE 100 and sterling continues to play out today. In forex, there has been a mild move higher this morning for sterling, whilst the cautious risk sentiment has hit for Aussie and Kiwi underperformance today. In commodities, the recent slip on the dollar and cautious sentiment has helped gold to tick above $1300 today. Oil is also supported due to suggestions that the Saudis would restrict oil exports.
On the economic calendar, UK Chancellor of the Exchequer Phillip Hammond releases the Spring Statement at 1230GMT (UK government spending review) which will have an impact potentially on sterling (although Brexit outcome remains paramount). At the same time the US Durable Goods Orders are at 1230GMT which are expected to show core ex-transport Durable Goods to growth by +0.1% in January (+0.1% in the month of December). US factory gate inflation, the US PPI is also at 1230GMT and is expected to show headline PPI slipping back slightly to +1.9% in February (from +2.0% in January), with core PPI