Hard Brexit fears hold back Pound
GBPUSD is trading up 0.3% at around 1.3990 against the US Dollar, moving higher in tandem with Euro as the volatile equity markets sell-off ended positively. However, the Pound is under pressure against the Euro as concerns increase about the probability of a hard Brexit. GBPEUR dropped towards the bottom end of its entrenched range we’ve seen over the last few months between 1.12 and 1.15.
With no important macro data due today, the market is getting ready for the super Thursday when the Bank of England releases its quarterly Inflation Report followed by the press conference with Governor Mark Carney.
The US trade balance increased to $53.1 billion from $50.4 billion the previous month. This deficit was greater than what the market was expecting and, more importantly, up from November. Further, US Job Openings and Labor Turnover Survey (JOLTS) dropped to 5.811 million which was, again, down from the previous month. Finally, Federal Reserve member James Bullard said recent labour market data may not be an indication of inflation accelerating, with current monetary policy closer to neutral.
As a result of weak data, unease in sentiment and a follow-through from the equity sell-off, the Dollar lost its early week gains, falling across the board on opening. Cable rose to mid-1.39s whilst against the Euro, levels just shy 1.2400 were seen.
In the Eurozone yesterday, German factory orders increased by a strong 3.8% m/m in December. Further, German Bundesbank President Jens Weidmann, in his speech yesterday, spoke of caution and how the greatest risk to the Euro now is assuming all problems are solved. Weidmann stated how shocks can still surprise the economy and place the Eurozone into an “endurance test”.
In a data-light Wednesday, the non-monetary policy meeting of the European Central Bank (ECB) will likely soak up the spotlight if the EU’s chief Brexit negotiator Michel Barnier, present at the meeting, shed light on the situation.
Data to Watch:
08:00 EUR Non-monetary policy’s ECB meeting
09:00 EUR ECB’s Lautenschläger Speech
13:30 USD Fed’s William Dudley speech
20:00 USD Consumer Credit Change (Dec)
20:00 NZD RBNZ Rate Statement
20:00 NZD RBNZ Interest Rate Decision
20:00 NZD Monetary Policy Statement
21:00 NZD RBNZ Press Conference