THE DAILY MACRO BRIEF: Plan B for Theresa, caution for Mario, patience for Esther

The bitterly negotiated agreement between Brussels and London was, as expected, rejected by the British Parliament. Yesterday, Mario Draghi gave a cautious speech in Strasbourg. Economic data on both sides of the Atlantic is disappointing. A Kansas City Fed official advocates caution and patience about the pace of rate hikes.

Rejection of the Brexit agreement, 5 days to find an alternative. The treaty negotiated between London and Brussels only got 202 votes in favor (and 432 against), whereas it needed 318 to win the vote. Theresa May therefore suffered, not surprisingly, a heavy defeat. Labour opposition leader Jeremy Corbyn called the result "catastrophic" and immediately announced the filing of a no confidence vote against the government. The latter will be debated today from 2 p.m. (vote around 8 p.m.). If the Prime Minister survives the no confidence vote, she will have until Monday to examine her options and find a plan B. A first option is to request an extension of the Brexit date, initially scheduled for March 29, in order to renegotiate with Brussels. The German Foreign Minister considers that this solution "makes no sense" and several report signal that the agreement will not be renegotiated. The second option is a new referendum, and the third is a no-deal Brexit. This solution is particularly worrying for EU members, who called on the United Kingdom, which has been in a state of uncertainty since yesterday evening, to clarify its position.

The ECB has been cautious about the European economy. Yesterday, in a speech to the European Parliament, Mario Draghi highlighted the "weaker than expected" economic performance due to "global factors". He therefore stressed the need to maintain a monetary stimulus policy to help raise prices and achieve a level of inflation close to the 2% target. Draghi will have the opportunity to say more at its next ECB monetary policy meeting on January 24.

In other news. Manufacturing activity in the New York region was significantly weaker than expected in January (3.9, compared to 11.6 forecast and 10.9 previously). The inflation rate in Argentina reached 47.6% in 2018 (2nd highest increase after Venezuela) announced the National Institute of Statistics. German GDP grew by 1.5% in 2018, the lowest rate in five years. Esther George, a Fed official, pleaded for a pause in the rise in interest rates to observe whether the economy responds as expected to the latest rate hikes by slowing its growth at a sustainable pace over time.