Last week, the Pound enjoyed its largest weekly rise for some time, spurred on by receding fears of Britain leaving the EU with no deal. Theresa May has said MPs would get to vote on a delay to Article 50 if her withdrawal agreement does not get approved before March 12th, relieving the pound of the uncertainty which had been holding it down. May’s Brexit deals remains largely unchanged however, with the main issue over the Northern Irish backstop not being written in law as a temporary solution. As May’s deal was declined in parliament previously due largely to the backstop, it is likely we will see a similar outcome when it is next put to vote on March 12th , unless the backstop amendments are agreed to by the EU.
The Week ahead:
The key data release for the pound will be the services and construction PMIs for February. The first of these will be released on Monday at 9.30 GMT and is forecast for a slowdown from 50.6 to 50.5. Services will follow on Tuesday at 9.30 GMT, also forecast to slow from 50.1 to 50.0. As always, Brexit risk will continue to be a factor on the markets, and if Theresa May wins concessions from the EU on making the Irish backstop temporary, we could see a date for the meaningful vote bought forward.
For the Euro, the main event will be the European Central Banks rate meeting on Thursday at 12.45 GMT. There is a risk currently that the ECB could look to extend its TLTRO programme. This provides eurozone banks with cheap lending, as a form of quantitative easing. An extension to this could be a step away from any proposed interest rate rises and could weigh on the euro. Services PMI’s will also be released for a host of eurozone countries on Tuesday from 8.15 GMT.
The main data release from the US will come on Friday, in the form of labour market statistics. The main release will be on wage data, forecast to rise from 0.1% to 0.3%, as this will have a bearing on inflation. As wages increase, inflation usually rises with it. With high inflation the Fed will look to raise interest rates which will strengthen the dollar. Non-Manufacturing ISM data will be the other main release from across the pond, due out on Tuesday at 15.00 GMT and forecast to rise from 56.7 to 57.4.