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Weekly Market Outlook: Powell Speech & UK Brexit Vote

Busy week in store for the USD

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The economic calendar this week is expected to be relatively quiet, save for the Brexit parliamentary vote. This marks a second scheduled parliamentary vote after the initial vote was canceled in December.

The Fed Chair, Jerome Powell will be testifying to the Joint Economic Committee in Washington DC this week. Investors will be watching the speech for any further clues from the Fed chair on monetary policy. Powell has maintained a somewhat dovish tone on the U.S. monetary policy following the December rate hike.

On the economic front, the U.S. retail sales and inflation data are on the cards this week. In the UK, the monthly inflation figures are due. Given the further weakness in oil prices, consumer prices could be forecast to rise at a slower pace once again on an annualized basis.

Other economic data from the UK will include the inflation report. Consumer prices are forecast to fall to 2.1% on the year ending December. Core inflation is forecast to remain steady at 1.8%. This would bring the UK’s inflation rate closer to the BoE’s target rate. The BoE Governor Mark Carney is also scheduled to speak over the week, following the Brexit parliamentary vote.

UK Parliamentary Vote Due This Week

The week ahead will see Brexit once again dominating the news wires. According to the schedule, the UK government is expected to hold a parliamentary vote on Brexit. This the second attempt by the British parliament after the UK’s Prime minister, Theresa May canceled the vote back in December last year.

This led to a vote of no-confidence motion filed against the British PM. Mrs. May managed to win the vote of no-confidence. According to the rules, the UK parties cannot call for another vote of no-confidence for a year.

With still no progress made on Brexit at the time of writing, there is a big chance that the parliamentary vote can be once again rescheduled.

The UK is expected to officially part ways with the EU on the March 29, and the prospects of the UK crashing out of the EU with no Brexit deal in hand is starting to become possible.

However, given how EU leaders are known for chalking out a last-minute deal, there is still hope that the UK and the EU could reach an agreement closer to the March deadline.

Fed Chair Powell to Testify

The Chairman of the Federal Reserve, Jerome Powell will be testifying to the Joint Economic Committee of Congress, in Washington DC this week. This event was delayed by one week due to scheduling conflicts.

Powell’s testimony will be closely watched and is the first testimony to the Joint Economic Committee after the December rate hike. The Fed Chair had turned somewhat dovish over the recent weeks and even ahead of the December rate hike.

This was partly attributed to the pressure from the U.S. President Donald Trump who was critical of Powell and the Fed’s monetary policy decisions.

So far, the only economic report to go by was the December payrolls report. Having shown a solid month with hiring and wages rising strongly, the U.S. economy is expected to be strengthened by the robustness of the labor market.

Later in the week, other economic reports coming in include the monthly inflation report and the retail sales figures.

Given the strong jobs report in December, the prospects of a decent figure on the retail sales cannot be ruled out. Investors will be watching the inflation numbers coming out. Concerns that consumer prices have weakened were only strengthened by inflation data from other economies which showed a slowdown.

The declines came mostly on account of lower energy prices. However, with wage growth rising sharply, there are chances that consumer prices in the United States will be weaker, but still somewhat stable.

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