Jerome Powell, the new Fed Chair did not disappoint markets yesterday. The USD strengthened on the back of his upbeat testimony to the House Financial Services Committee. He specifically said “Some of the headwinds the US economy faced in previous years have turned into tailwinds”. Furthermore he said “Fiscal Policy has become more stimulative and foreign demand for US exports is on a firmer trajectory.” GBPUSD pulled back into the 1.38s on the back of these and other hawkish comments, but the USD failed to kick on as US Durable Goods orders disappointed yesterday, dropping 3.7%.

Closer to home, UK data was limited yesterday. However overnight we learnt that UK consumer and business confidence was muted in February as Brexit obscured prospects for economic growth. In other news UK data, shop prices fell in February in a further sign that inflationary pressures from a weaker pound had passed their peak, according to the British Retail Consortium. With regards to Brexit, Downing Street has ruled out any return to a hard Irish border. This came after the leak of a letter from the Foreign Secretary Boris Johnson to the Prime Minister, in which he appeared to contemplate the possibility of future customs border checks. Boris was also earlier interviewed on radio and a likened the Irish border issue to crossing the London Borough Congestion zone. 

In response to Labour’s stance earlier in the week, the international trade secretary, Liam Fox said critics were wrong to stay in the EU Customs Union as Britain would give up the freedom to strike free trade agreements. Sir Martin Donnelly, the former boss of Liam Fox’s international trade department, argued against this saying “you’re giving up a three course meal… for a promise of crisps in the future.”

It’s a big day in Brussels today for the very reason that a draft text of the Brexit Treaty is being published. This will not include details of the future trade deal, as this is still being negotiated. It’s about the EU Commission putting into legally binding text the agreements that have already been negotiated (the divorce bill, citizens’ rights, the Irish border) – the document is estimated to be about 120 pages.

The day ahead

Turning our attention to the day ahead, again there is not much on the data front for the UK. Focus will therefore largely be on the States where we have the second estimate of US Q4 GDP numbers released at 13.30. Ahead of this we have US Mortgage data at noon and ECB’s Angeloni speaking at 13.00. Late afternoon, attention turns back to the States for the Chicago Purchasing Manager Index at 14.45 and US Pending Home Sales at 15.00.

Thought of the day

Unless you live underground you might have noticed there’s been a lot of snow overnight. It still surprises me how the UK seems to be shocked each time a bit of snow lays on the ground. Widespread panic (helped by newspapers saying ‘get home by 6pm!’), delayed trains and angry commuters are what makes London feel like home. Unless it is 10-15 degrees trains tend to struggle which is when you see the best kind of tube rage! Where grown adults get angry at each other because they cannot get to work on time. It could be worse though, spare a thought for those walking home from work in Wulungurru, Northern Australia, where it is hot enough to cook an egg on the road! It is currently 5pm in Wulungurru and it is a toasty 42.3°C. I hope you all made it to work safe and sound, the Investec Dealing team are all in and raring to go. Give your dedicated dealer a call on 0800 055 6339 to catch up on yesterday’s speech from Jerome Powell and how to position yourself ahead of Theresa May’s hotly anticipated speech on Friday!