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Pound bounces as US buys Goldilocks data

Despite a seeming impasse in the UK parliament the British pound surged this morning as politicians rejected a no-deal Brexit. Asia Pacific markets are set to lift after US investors piled in on data that further confirmed a US Federal Reserve on hold while pointing to growth to come. However influential data from China due mid-session could change the course of trading.

A day after rejecting the European Union’s “final offer” on a negotiated withdrawal the UK parliament has voted against a no-deal Brexit. While the path ahead is not clear, seeking a deferral of the scheduled March 29 exit seems inevitable. The pound is trading at nine month highs, although the FTSE 100 languished while other European share indices rose.

US producer prices remained steady in February, confirming there is little pressure to raise interest rates. At the same time preliminary reads on January durable and capital goods orders (up 0.4% and 0.8% respectively) and construction spending (+1.3%) confounded negative expectations. US investors responded enthusiastically, pushing all major indices higher and erasing last week’s losses. Commodity markets joined the party. Crude oil jumped more than 2%, and lead and aluminium led base metals higher.

China industrial production growth in February is expected to have slowed to 5.6% (year-to-date, year-on-year) from 6.2% in January. Similarly, retail sales data is forecast to show a drop to 8.2% from 9%. Any divergence from these forecasts has potential to either boost or stymie investor enthusiasm.

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