Brexit Grow Slow
Preliminary UK GDP data showed growth of only 0.2% in Q4 2018 compared with forecasts of 0.3%, and the annual rate dropped to 1.3%; the lowest reading since 2012. Industrial production data disappointed, declining 0.5% in December and manufacturing output fell 0.7% with the auto sector notably weak. Business investment also registered a quarterly decline and confidence in the economy remained weak on further evidence that political uncertainty will damage confidence and activity.
EU Chief Negotiator, Michel Barnier, stated that the Irish backstop is just an insurance policy and that the Withdrawal Agreement would not be renegotiated. The Euro pushed Sterling back to the 1.1400 area despite its own vulnerability while the Pound dipped to lows below 1.2850 against the Dollar. Bank of England (BoE) Governor Mark Carney and Theresa May are slated to speak today.
The Dollar continued its run of form, breaking of several technical levels and securing further net gains as short-term funds moved into the US currency. The Dollar index pushed to six-week highs and the Euro’s move below 1.1300 triggered stop-loss selling and fresh 2019 lows near 1.1250. Fed Governor Michelle Bowman stated that the economy is in a good place and that she was comfortable with the current policy stance.
US NFIB small-business confidence index declined to 101.2 for January from 104.4 previously; the lowest reading since November 2016. The government shutdown could have contributed to the decline, but expectations also declined significantly on the month which raised some concerns over the outlook. The Euro has secured a slight technical correction this morning and opens around 1.1280 despite weak underlying sentiment.
Italian and German yields both edged higher on Monday, which did nothing to dispel the fears over a fresh crisis facing Italy. The Euro itself struggled to shake the view that there is a growth problem for the region and could not make any gains.
A strong Dollar has exerted downward pressure on the single currency, to the point that the pair dipped below the 1.1300 level which is a fresh 2019 low. The Dollar pushed to six-week highs after a strong Monday but early trading in the Asian session has seen the pair oscillate in a narrow trading band.
Data today is minimal for Europe. German Buba President Weidman gives a speech, as does Governor Carney, but these are the only significant releases today.
Data to watch:
24H EUR EcoFin Meeting
00:30 AUD Investment Lending for Homes (Dec)
00:30 AUD Home Loans (Dec)
08:00 EUR German Buba President Weidmann speech (Germany)
13:00 GBP BoE’s Governor Carney speech
17:45 USD Fed’s Chair Powell speech
23:30 USD Fed’s Mester speech
23:30 EUR ECB’s Lautenschläger speech
23:30 AUD Westpac Consumer Confidence (Feb)