The British pound is making tentative gains in line with other dollar pairs. Yesterday’s market reaction to Theresa May’s historic and fractious cabinet agreement on her Brexit proposal is best summarised as ‘meh’. After much volatility throughout the day, the pound finished slightly lower, with those losses being erased this morning. Markets appear encouraged that May has passed the cabinet hurdle, but the real challenge will be the parliamentary vote which will be hostile to put it mildly.
The GBP/USD and GBP/JPY have made small gains, while the EUR/GBP is unchanged after rallying yesterday.
Other dollar pairs are performing well, with the EUR/USD and AUD/USD rallying. The latter is the stand out performer on solid employment gains.
The USD/CHF is holding at the highs, while the USD/CAD is pulling back as oil prices make a nascent recovery.
The USD/JPY is on the back foot again, while other yen pairs especially the AUD/JPY make gains.
Today, we have UK retail sales at 09.30.
MPC Member Tenreyro speaks at 13.00.
US core retail sales are released at 13.30, alongside the Philly Fed Manufacturing Index.
FOMC member Quarles speaks at 15.00.
Crude oil inventories are at 16.00.
Fed Chair Powell speaks at 16.30, with Bostic speaking at 18.00.
There is some upside potential for the pound, but the downside risk is far more severe from here. Compared to the Australian dollar which is showing increasing signs of confidence, the pound still looks vulnerable.