IFX Market Report
Tuesday 7th February 2017

Market Report

Last night, a normally subdued Westminster was awash with MP’s who were in The House of Commons to debate the second phase of the Article 50 bill. The Labour party tabled a number of amendments; one which sought to garner greater political scrutiny of Article 50, with a review every 2 months, was squashed with a (333:284) majority. The Labour party are keen to focus on, access to the single market, a more ‘meaningful’ vote after the two year negotiations and securing the rights of EU nationals living in the UK (which Theresa May herself backed yesterday). The PM has told MPs not ‘use parliamentary procedures to delay the passage of the bill and the second phase of the debate will continue for the next three days.

The Halifax House Price index was released at 08:30 this morning and showed that, prices dropped 0.9% in the month of January, eroding the increases seen at the end of 2016. Marin Ellis, Halifax housing economist commented; "UK house prices continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates." Nevertheless, UK House Prices are now eight times average earnings, which the highest on record and housing minister Sajid Javid said this morning; "The market is broken and it's time to get real,".

Multinational professional services giant Price Waterhouse Cooper (PWC) yesterday released a paper that came to the conclusion that while the UK will be impacted by the June 23rd Brexit referendum, the ‘UK could be fastest-growing G7 economy if it gets trade deals right’. The firm said that developing alternative relationships with the likes of China are ‘critical’ to UK success and also that our ‘relatively large working age population’ and our ‘flexible economy’ could help us outperform the U.S. Canada, France, Germany, Italy and Japan by 2050.

Sterling took losses versus the Dollar yesterday as the greenback strengthened on comments from Philadelphia Federal Reserve President, who said he supported a second rate hike in March. GBPUSD opened at 1.2499 and gradually traded lower by 0.58% to hit 1.2427 by late-afternoon. Overnight the pair has taken further hits following this morning’s release of UK house price data and now trades 1.12% below yesterday’s open at 1.2360.

GBPEUR traded higher in the morning rising 0.54% from 1.1576 to hit the intra-day high of 1.1638, nevertheless the pair relinquished these gains overnight and now trades just a fraction higher at 1.1601 following poor UK house price data.

Worldwide News

EURUSD has been on the decline so far this week as the world’s largest currency cross feels the impact of a Dollar rally. The U.S. Dollar index (DXY) is back above 100 this morning, up 0.79% at 100.70 following a surprisingly solid performance of the U.S. Nonfarm Payroll report on Friday. EURUSD currently trades 1.21% below yesterday’s opening rate of 1.0788 at 1.0659 this morning.

Paris' deputy mayor is attempting to capitalise on the current economic uncertainty in London and make Paris the EU capital of finance. He said that Paris had "an innovation mechanism that is brilliant" and that the French capital would have to compete with Frankfurt for the honour. While companies continue to consider their future in the EU, the city is proving resilient to large outflows of people and capital, like Samuel Johnson said; “when a man is tired of London, he is tired of life”.

Staying in France, Marine Le Pen and her far-right ‘National Front’ party are now leading the pack in the French presidential election, the latest poll released by Ifop-Fidicual shows that Le Pen is in the lead with 25%, while independent Emmanuel Macron received 20.5% of the vote and Francois Fillon’s votes have fallen of a cliff following ‘Penelopegate’ and now yields only 18.5%. JP Morgan CEO, Jamie Dimon said that a win for Le Pen could be the catalyst for EU collapse. French bond prices fell to an 18-month low on Monday of 1.07% for the 10-year.

European Central Bank (ECB) President Mario Draghi has criticised the news out of the U.S. that newly elected President Donald Trump is looking to remove the post-2008 Wall Street reform and consumer protection act of Dodd-Frank of 2010. The reform aims to decrease the risks in U.S. financial markets and was a response to ‘too big to fail’ and ‘bailout’ culture. Draghi said: “The last thing we need is a relaxation of regulation,”. “The idea of repeating the conditions of before the crisis is very worrisome.”