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Can we agree on anything?

Can we agree on anything?

GBP
The Pound is trading weaker due to tensions heightening between the two Brexit parties as doubts over a smooth transition deal and exit from the European Union in 2019 arise. A draft of the legal text formed by the EU that will set out the rest of the exit transition was rejected by UK officials.

The European Union blueprint on Brexit yesterday stated that in order for Northern Ireland to avoid a hard border with the Irish Republic, they should remain with the EU. Further, there was rhetoric of placing single market access for Northern Ireland on hold during the transition period.

Threats over a breakdown in negotiations undermined Sterling, especially with the UK likely to oppose the Northern Ireland proposals. Weak sentiment from Brexit discussions was further amplified by discouragement in the potential rise in interest rates in May. The Euro rallied to move below the 1.1300 mark whilst Cable dropped below 1.3800 for the first time this year.

USD

US fourth-quarter GDP was pared back to 2.5% as expected in the second reading (from 2.6% in the first reading), despite an upward revision to consumer spending. January pending home sales declined 4.7% and February’s Chicago PMI index declined to 61.9 from 65.7, below market expectations, although adverse weather conditions may have contributed.

Despite the slightly disappointing data, the US Dollar advanced to a five-week high above 90.50 on a trade-weighted basis as the Euro dipped below 1.2200 for the first time in six weeks.

EUR

The Euro is down around a cent from yesterday versus the Dollar and the currency is at risk of further losses heading towards the Italian elections on Sunday. Eurozone CPI eased to 1.2% in February, in line with expectations.

The latest German labour-market data recorded a decline in unemployment of 22,000 for January after a 25,000 decline the previous month, maintaining confidence in underlying employment trends amid strong growth conditions. Eurozone consumer inflation also declined to 1.2% from 1.3% according to the flash data while core inflation remained at 1.0%, both figures matching expectations. The subdued data maintained expectations of a relatively dovish European Central Bank (ECB) stance which undermined the Euro as position adjustment also had a significant negative influence.

The UK Prime Minister Theresa May will meet top EU official Donald Tusk today, 24 hours before a major speech on British relations with the bloc after Brexit. Her talks with the European Council president come amid tensions over the EU’s draft withdrawal treaty yesterday.

Data to Watch:

08:55 EUR Markit Manufacturing PMI (Feb)
09:00 ITA Unemployment (Jan)
09:00 EUR Markit Manufacturing PMI (Feb)
09:30 GBP Markit Manufacturing PMI (Feb)
09:30 GBP Consumer Credit (Jan)
09:30 GBP Mortgage Approvals (Jan)
10:00 EUR Unemployment Rate (Jan)
13:30 USD Personal Consumption Expenditures – Price Index (YoY) (Jan)
13:30 USD Personal Income (MoM) (Jan)
13:30 USD Personal Consumption Expenditures – Price Index (MoM) (Jan)
13:30 USD Personal Spending (Jan)
13:30 USD Core Personal Consumption Expenditure – Price Index (YoY) (Jan)
13:30 USD Continuing Jobless Claims (Feb 16)
13:30 USD Initial Jobless Claims (Feb 23)
14:45 USD Markit Manufacturing PMI (Feb)
15:00 USD Fed’s Powell Speech
15:00 USD ISM Prices Paid (Feb)
15:00 USD ISM Manufacturing PMI (Feb)
15:00 USD Construction Spending (MoM) (Jan)
16:00 USD Fed’s William Dudley speech

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