GBP/JPY

The Swiss Franc and the Japanese Yen are considered safe haven currencies

The British pound was the weakest major currency yesterday on the back of reports that there was no agreement on a customs union between Labour and Conservatives. It fell further this morning in reaction to the latest consumer inflation data.

So, the UK parliament couldn’t find a consensus on Brexit last night after MPs voted on eight different options and – lo and behold – there was majority for absolutely none of them.

Rumours are circulating that 3 Conservative lawmakers are to follow the 7 Labour MPs and defect to the Independent Group later today.

As my colleague Fawad Razaqzada noted earlier this morning, markets were relatively dull heading into the day’s marquee event, the release of UK PM Theresa May’s “Plan B” Brexit bill. Unfortunately, the “new” proposal did little to shake things up.

If the government loses the no confidence vote then an early general election will be called. But rebel Tory MPs and the DUP are both expected to come back on side and back the government, meaning Theresa May is likely to survive.

Next week’s major market risk event is most likely to be the UK parliament’s so-called “meaningful vote” on the withdrawal agreement Prime Minister Theresa May negotiated with the European Union at the back end of last year.

A week from today we will finally have the “meaningful vote,” when UK’s parliament will decide whether to approve the Brexit deal which Prime Minister Theresa May negotiated with the European Union at the back end of last year.

The pound initially fell on the back of the inevitable news that the UK Prime Minster was facing a vote of confidence this evening. However, Sterling then rebounded as several ministers came out and voiced their support for Theresa May.

The handling of the whole Brexit process by the UK government has frankly been a total disaster, to put it nicely. Today saw several more ministers resign, this time over the Draft Withdrawal Agreement from the EU which was secured last night.

Kicking off the busy turn-of-the-month week for economic data, the Bank of Japan will conclude its monetary policy meeting early in Wednesday’s Asian session.

Thanks to positive risk sentiment, consistent improvement in UK data and growing optimism over a Brexit deal, the GBP/JPY has risen about 900 pips from its low of just under 140 in mid-August.

GBP dumped below 1.3000 in what looked like a mini flash crash. Bizarrely, this came just after the release of solid-looking UK wages data.

The key themes in the FX markets over the past few days have been (1) dollar strength and (2) yen weakness.

It had fallen viciously for three weeks and the selling gathered pace ever since the Bank of England Governor Mark Carney strongly hinted at the prospects of no interest rate rises this month, owing to weakness in UK data.