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Brexit vote fails again

Published March 13, 2019

By Nicholas Cork

AUD continued to grind higher over the last 24 hours towards 0.7100 as it tries to establish a base at the 70 cent mark. Slightly weaker US Inflation print overnight has helped support the AUD and in turn, pushed US 10 year yields below 2.6% for the first time since January.  

An overnight speech by Guy Debelle on climate change and the impact on monetary policy went largely unnoticed with the main takeaway being that the current drought is pointing to a 0.15% impact on the 2019 GDP print, and a pick-up in investment spending on renewable energy in recent years has been noticeable… “It has been big enough to have a noticeable impact at the macroeconomic level and affect aggregate output and hence the monetary policy calculus,” he said.  

In another RBA study, this time on Australian Housing prices, economists Peter Tulip and Trent Saunders revealed that their research shows that rate cuts were actually the driving force of the recent property price boom. The study found that just a single percentage point cut resulted in an 8% rise in property prices. “We build an empirical model of the Australian housing market that quantifies interrelationships between construction, vacancies, rents and prices. We find that low-interest rates partly reflecting lower world long-term rates — explain much of the rapid growth in housing prices and construction over the past few years.” So there you are…

The rest of the session was spent waiting for the Brexit vote with yet another blow for Theresa May. Her exit deal was defeated in parliament this morning for a second time and just 17 days before the planned departure date.  MPs voted against May’s amended Brexit deal by 391- 242, citing the Brexit negotiations haven’t substantially changed from the deal May offered in January.  Lawmakers are now due to vote tomorrow on whether Britain should exit the EU without a deal. It’s expected parliament will reject a “no-deal” Brexit and vote on Friday on whether government should request a delay to allow further negotiations.

In trade talk land, US trade negotiator Lighthizer says US-China trade talks may end in weeks, with the US government pushing for an end to practices and policies it argues have given Chinese firms unfair advantages. “If those issues are not resolved in favour of the United States, we won’t have a deal”.  US and China have another call scheduled today with Lighthizer commenting “We are working more or less continuously”.

USD index has now seen a triple-top form at 97.70  (Reuters)