Market Update

Brexit remained at the forefront of the UK's political scene, with another week of dramatic events in Westminster. However, it's crucial to contextualize the developments amidst the chaos.
Predictably, the outcomes of the Parliament votes reflected the majority's opposition to both Theresa May's deal and a no-deal Brexit. The repeated discussions only reinforced the notion that Article 50 must be extended, delaying the UK's exit beyond March, as we have consistently emphasized. While MPs voted against a 'no-deal Brexit,' it doesn't guarantee its prevention—only approving May's agreement or revoking Article 50 can achieve that. A Brexit delay requires unanimous agreement from the remaining 27 EU members, who demand clear reasons for the extension, potentially leading to the UK's participation in May's European elections.
Interestingly, these events align with Chief Negotiator Olly Robbins' strategy, as heard in mid-February, indicating that MPs must accept May's deal or face a long delay, potentially resulting in no Brexit.
Amidst the Brexit noise, the most significant data release was Tuesday's (12 March 2019) US CPI inflation report. Inflation, consistently below global central banks' expectations, was expected to maintain a 2.2% year-on-year rise. However, lower prices for cars and prescription medicine resulted in a core reading of 2.1%. This allows the Fed room to adhere to its patient stance on future interest rate increases, supporting our Goldilocks view of reasonable economic growth and subdued inflation. Solid factory orders data on Wednesday reinforced this perspective, despite media's pessimistic outlook.
In the UK, following a weak December (with a 0.4% contraction), the economy rebounded strongly, expanding by 0.5%—the most significant monthly gain since December 2016. However, these figures can be volatile, especially amid ongoing Brexit uncertainty. Additionally, Chancellor of the Exchequer Philip Hammond delivered his Spring Statement.
Looking ahead, major releases in the UK include employment data, CPI, and retail sales. Additionally, BoE and Fed monetary policy meetings are scheduled.