Spreadex Market Update

Pound tumbles ahead of post-indicative votes impasse 5-hour Cabinet face-off



Monday night saw politics once again triumph over practicality, MPs defeating all four Brexit alternatives provided in the second round of indicative votes.

With the Tory Party fractured almost to the point of irreparability, a 5-hour slog of a Cabinet meeting is pencilled in for Tuesday, as Theresa May tries to find a Brexit path that can actually get through Parliament. A no-deal exit, or even a snap election, are now increasingly likely options, with neither route one sterling will happily walk down.

Tumbling at the start of the session, cable has slipped under $1.304, while against the euro the pound is trading below €1.165. That its losses weren’t larger is perhaps a sign of Brexit fatigue, and maybe the (naïve?) belief that MPs will still try to avoid a ‘no-deal’ outcome.

Investors will get another chance to assess how the UK economy held up in what was meant to be Brexit month when March’s construction PMI is posted. Analysts are expecting the reading to remain in contraction territory, but only just, with forecasts of a 0.3 rise to 49.8 month-on-month.

The pound’s Brexititus allowed the FTSE to build on yesterday’s springy start to the second quarter, with the UK index climbing half a percent to cross 7350, seeing it finally recover the sharp losses posted on Friday 22nd March. Its Eurozone peers weren’t as chipper; the DAX dipped 0.1%, keeping it short of 11700, while the CAC could only add a handful of points (though that was enough to push it above 5400).

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