Sterling held a firm tone as the government survived a no-confidence vote with markets expecting parliament to rule out a ‘no-deal’ Brexit.

The dollar made net headway as the Euro and commodity currencies drifted weaker with existing yield spreads underpinning the US currency.

Sterling held a firm tone as the government survived a no-confidence vote with markets expecting parliament to rule out a ‘no-deal’ Brexit.

Equity markets made net gains on Wednesday, although sentiment was more cautious on Thursday amid fresh doubts over US-China trade talks.

Oil prices were resilient with limited net gains on hopes that China would support domestic demand and maintain strong crude imports.

Gold was resilient despite the firm dollar tone and a lack of defensive support for the yen and Swiss franc.

The headline UK CPI inflation rate declined to 2.1% for December from 2.3% previously, in line with consensus forecasts, while the core rate was slightly above market expectations at 1.9% from 1.8%. Bank of England Governor Carney stated that the Sterling rebound appeared to indicate that markets considered that the risks of a ‘no-deal’ Brexit had declined slightly.

Overall Sterling volatility declined during European trading as markets waited for the House of Commons no-confidence vote in the government. There was GBP/USD support below 1.2850 and GBP/EUR drifted higher.

The government won the no-confidence motion tabled by the opposition Labour party by 19 votes with Prime Minister May pledging to hold talks with opposition members and Sterling edged stronger after the result. There were fresh housing-sector concerns with the headline RICS index declining to -19 from -11 previously while sentiment for the next quarter declined to a 20-year low.

Currency sentiment was resilient with further expectations that parliament would reject a ‘no-deal’ Brexit outcome, delay EU withdrawal or sanction another referendum even though near-term deadlock continued. GBP/USD traded around 1.2870 on Thursday with EUR/GBP at 6-week highs just above 1.1300.

Economic Calendar

Expected Previous
10:00 Euro-Zone Core CPI (Y/Y)(DEC 01, 2018) 1.00% 1.00%
10:00 Euro-Zone CPI (M/M)(DEC, 2018) -0.20% -0.20%
10:00 Euro-Zone CPI (Y/Y)(DEC, 2018) 2.00% 1.60%
11:00 OPEC Meeting - -
11:00 European Central Bank Sabine Lautenschlaeger Speaks - -
13:30 USD Building Permits(DEC, 2018) 1.270K 1.265K
13:30 USD Building Permits (M/M)(DEC, 2018) - -0.40%
13:30 USD Housing Starts(DEC, 2018) 1.254K 1.256K
13:30 USD Housing Starts (M/M)(DEC, 2018) - 3.20%
13:30 USD Philadelphia Fed. Manufacturing Index(JAN) 10 9.4
13:30 USD Initial Jobless Claims(DEC 22, 2018) - 216K
13:30 USD Continuing Jobless Claims(DEC 22, 2018) - 1.722K
15:45 FOMC Governor Keith Randal Quarles Speech - -
21:30 NZD Business NZ PMI(DEC, 2018) - 53.5
23:30 JPY National CPI Ex-Fresh Food (Y/Y)(DEC, 2018) 1.00% 0.90%
23:30 JPY National CPI (Y/Y)(DEC, 2018) - 0.80%
23:30 JPY Buying Foreign Bonds(NOV 28, 2018) - -1004.3B

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.