Brexit headwinds reappear for Sterling
17th January 2020 Market Update
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?? GBP - Sterling opened the week by reacting to comments made by Chancellor Sajid Javid in the Financial Times on Saturday that Britain would not commit to EU rules in post Brexit trade talks. Markets fear that this will increase trade frictions between the EU and UK in the future and suggests that the trade negotiations will be difficult. Sterling regained ground from mid morning which reflects the attitude that some analysts are taking that the Pound does not have much more room to fall and are therefore taking up long positions. There are plenty that still have a negative outlook for the Pound, however.
Today will feature crucial pieces of data that will inform the Bank of England Monetary Policy Committee ahead of their meeting next week. Average Earnings figures are due to fall marginally with the Unemployment Rate staying flat. Markets have been quick to punish the Pound for any disappointing data recently and we could see a repeat today.
?? EUR - The Eurozone had a lack of data releases yesterday which meant it was flat for the day versus the Pound but lower against the US Dollar.
Today sees the ZEW Economic Sentiment Survey released for Germany and the Eurozone as a whole. The German figure typically carries most weight for markets as the single bloc’s biggest economy and is expected to improve on the December figure. However, markets may be more focused on the Interest Rate decision on Thursday and looking for more clues from Lagarde, after a slightly more optimistic tone in December.
?? USD - The US Dollar index hit its highest level of the year so far yesterday morning. This was despite trading volumes being limited by the US Bank Holiday for Martin Luther King Day. The Greenback rose on the back of solid economic figures on Friday which showed US homebuilding reaching a 13 year high and manufacturing moving to its highest level in 8 months.
Limited data is published today from the other side of the Atlantic with only the Redbook Index of retail sales being released at 13:55. This is of low importance and is unlikely to affect markets severely. The 50th World Economic Forum in Davos begins today with Trump expected to take a softer stance than last year following the recent deal with China. The US Dollar looks set to continue its recent strength.
GBP: Average earnings will be in focus today
EUR: Markets awaiting Lagarde’s speech on Thursday
USD: Trump speaks at Davos as impeachment trial begins
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