Sterling has seen its third consecutive session of gains last Friday, and rose to a three-week high against the dollar on Monday, as a result of the weakening of the dollar and a MPC (Monetary Policy Committee) member, Kristin Forbes, voted to raise rate this month, despite Brexit uncertainty and risks on economy.
The recent rebound of Sterling was helped by the MPC member’s vote on a rate hike. However, from a broader scope, the uncertainty associated with the Brexit procedure until the final Brexit deal is done, and the turmoil over a second Scottish referendum, is likely to pose downside risks on the UK economy and Sterling.
The UK parliament has finally passed the Brexit bill on 13th last Monday. The UK Prime Minister Theresa May is expected to trigger Article 50 of the Lisbon treaty in the end of this month or in April, starting the 2-year negotiation process over the Brexit deal with the EU.
Scotland’s First Minister, Nicola Sturgeon, has called for a second Scottish independence referendum vote, to be held in 2018 or 2019, before the final Brexit deal is sealed. The Scottish Parliament will vote on whether the First Minister should be given the authority to seek a Section 30 order from Westminster on Wednesday. Although the SNP is not the majority party in the Scottish parliament, the Green party also supports independence.
The UK Prime Minister expressed last week that this is not the right timing for a second Scottish referendum, and she will not allow the referendum to carry out before the Brexit, the country should be working together, not pulling apart.
Today is relatively light on economic data releases. We will see the release of a series of UK inflation data for February, at 09:30 GMT on Tuesday. It will likely affect the strength of Sterling and Sterling crosses.
US Secretary of States, Rex Tillerson, visited China for the first time, meeting China’s president Xi Jinping in Beijing on 19th.
Despite the sensitive issues between the US and China, such as trade protectionism, currency manipulation, and North Korea’s nuclear program, Xi Jinping stated that the mutual benefits between the two nations outweighs the conflicts, cooperation is the only right choice for long term development.
The trip paves the way for the prospective summit between Trump and Xi Jinping in April.