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First Grexit, then Brexit and now Frexit

First Grexit, then Brexit and now Frexit

Sterling fell against the Dollar for a third consecutive day yesterday, settling around the 1.2450 mark after posting a daily low of 1.2427. The Pound was still suffering from last Thursday’s Bank of England’s comments that there is no rush to hike rates, and that interest rates could move in either direction.

The latest British Retail Consortium retail sales data recorded a 0.6% decline in like-for-like sales. This suggests an underlying slowdown in demand while a strong increase in credit card sales was boosted primarily by increases in fuel sales as prices rose. The data overall maintained concerns surrounding weaker spending growth during 2017 and dampened Sterling demand.

MPs have comfortably seen off four attempts to amend the “Article 50” bill. Further votes are due later today and on Wednesday. The House Speaker, John Bercow, announced that he would veto any invitation to Donald Trump to address Parliament, causing consternation and anguish on both sides of the pond.

The US jobs market continued its winning streak after the Labor Market Conditions Index (LMCI) printed at 1.3 for January after December’s figure was revised to 0.6. The market will continue to watch Donald Trump’s executive orders, which have the potential to not only affect a sector but the entire market as his protectionist policies have sent airlines, leisure and tech equities lower. Investors are also now using computer programs that identify when President Trump tweets about a specific company or industry.

German factory orders data defied expectations of 0.5% with growth of 5.2% in December; November’s figure showed a contraction of 3.6%. The Eurozone Sentix investor confidence index met forecasts, falling to 17.4 from 18.2.

Mario Draghi’s speech reiterated that a “very accommodative” monetary policy was necessary and that the European Central Bank (ECB) could increase bond purchases if needed. Draghi repudiated accusations emanating from the US that Germany or the ECB are currency manipulators. He had Trump in his sights when he voiced his concerns about US “protectionist measures” and also commented that “the last thing we need at this point in time is a relaxation of regulation”.

The French presidential election generated concerns after opinion polls suggested that National Front leader Le Pen remains in pole position. The poll also showed that the Conservatives and the Socialists could fail to make the second round of voting. This increased concerns surrounding the risk of a radical shift in French policies and of a potential EU membership referendum.

Data to watch: 1.30pm US Trade Balance. 4.35pm EUR German Buba President Weismann speech. 8pm US Consumer Credit Change.

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