In a fairly subdued start to the week markets in Europe traded modestly higher yesterday, while US markets edged lower after both Goldman Sachs and Citigroup posted Q1 numbers that didn’t inspire.

While Goldman’s beat on profits, largely due to cost cutting measures, trading revenues were disappointing, a theme that was also present in JP Morgan’s results last week, and with Bank of America Merrill Lynch due to report later today, this theme could well continue.

This theme is likely to be a worry for European banks, which remain by and large in a much weaker state than their US counterparts. If US banks given their more efficient trading operations are struggling, then what does that say about the Deutsche, Paribas and Barclays of this world?

With Asia markets shrugging off the slight weakness in US markets to trade up to six month highs, trade talks between the US and Japan got underway in Washington yesterday, and this strength in Asia looks set to put European markets on the front foot this morning.

One of the more surprising aspects of how the UK economy has performed over the course of the past few months is how resilient it has been in the face of an onslaught of scare stories in the wake of the 2016 Brexit referendum. Warnings of half a million job losses and an instant recession have given way to almost half a million jobs being added, and while the economy has slowed down over the past year, the same has also been true for the global economy.

It is true that the political farce of the past 12 months has seen business investment fall off sharply, as businesses hold back decisions until they have clarity about what any post Brexit trading environment will look like. This seems entirely sensible given the unstable political backdrop as well as the uncertainty surrounding what any eventual outcome is likely to be.

The problem now is that we have another six months of this gridlock and while the UK economy has been able to absorb a lot of the Brexit uncertainty up until now, the longer it goes on, the more damaging it is likely to be in the longer term. Furthermore, the continued uncertainty only serves to give business more time to potentially move business out of the UK, causing the economy to bleed out slowly, in the face of the continued political dysfunction.

For now, the unemployment rate is sitting at a multi-year low of 3.9%, while wage increases have doubled in less than 2 years from lows of 1.7% in the summer of 2017 to 3.4% now.

Today’s unemployment numbers for the three months to February is expected to remain steady at 3.9%, while wages excluding bonuses for the same period are expected to also come in, as in January, at 3.4%.  How long this scenario can continue given events at Westminster is anyone’s guess, but the clock is ticking ever louder.

One thing is certain, in the absence of any conclusion to the current situation at Westminster, the Bank of England won’t be raising rates anytime soon, if anything the risk is, they may have to cut them, and it won’t be because of the economics, it will be because of the politics.

EURUSD – edged up to the 1.1330 area last week but was unable to close above the 50-day MA. A move above 1.1330 could well see further gains towards the 200-day MA and 1.1450. The euro still has solid support at the 1.1180 area with interim support also at 1.1230.

GBPUSD – still treading water above the 200-day MA and 1.2960 area which continues to act as solid support. We also have support at last week’s lows at 1.3020, while the 1.3170 area still remains a key barrier on the upside and is likely to cap until we get a clearer political picture. Below 1.2960 opens up the 1.2800 area.

EURGBP – continues to edge higher but is currently struggling to make gains above the 0.8650 area. It needs to move above here to argue for a move towards the 0.8720 level. While below here the bias remains for a move back to the recent lows at 0.8500.

USDJPY – finding the March peaks at 112.20 a tough nut to crack for now, with a move through 112.30 targeting a move towards 113.00. The 111.20 area should now act as support, while a move below that opens up the 110.70 level again.

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