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Pound up on Brexit brinkmanship

Pound up on Brexit brinkmanship

GBP
The latest Bank of England (BoE) credit survey added to unease in the housing sector when it reported that lenders expected a slowdown in demand for housing finance over the next quarter; caused by Brexit uncertainty. Michel Barnier, EU Chief Negotiator, stated that should the UK’s “red lines” be moved, the EU would immediately negotiate and that it was willing to extend talks beyond free trade. Although Jeremy Corbyn demanded that a ‘no-deal’ Brexit be ruled out before he joined Brexit talks, ministers and representatives of other parties have already started.

The government confirmed that it will present plans for “next steps” on Monday and speculation of another referendum rose. Markets continued to price in the lessening risk of a ‘no-deal’ Brexit which supported Sterling, enabling a late assault on 1.3000 against the Dollar and a push above 1.1363 on the Euro. The Pound opens only slightly lower this morning as we await UK Retail Sales results.

USD

US jobless claims declined to 213,000 in the latest week from 216,000 previously with no evidence of a significant impact from the partial US shutdown, which maintained overall confidence in the labour market. The closely-watched headline Philadelphia Federal Reserve (Fed) index strengthened to 17.0 for January from a revised 9.1 previously and well above consensus forecasts with new orders also increasing at a faster pace. Employment increased at a slower pace while there was a slowdown in the rate of price increases. The data overall boosted confidence in the US outlook, especially as it was a significant shift from recent releases which have tended to be weaker than expected.

Chicago Fed President Evans stated that the Fed can easily take a patient stance towards additional rate increases. The Dollar held a firmer overall tone as the Euro continued to test support below the 1.1400 level.

EUR

Concerns of growth in the Eurozone were compounded yesterday when final headline CPI numbers were revised down to 1.6% for the region from 1.9% in November. This also led economists to strengthen their views that a European Central Bank (ECB) rate hike is increasingly unlikely to happen in 2019.

All of this combined led to the Euro struggling to break the 1.1400 mark versus the Dollar and falling away against the Pound, which had a strong day yesterday.  

Very little data is due out today, with the most important being retail sales out of the UK. Current account numbers for November are due from the EU but little volatility is expected.

 

Data to watch:

24H EUR G20 Meeting
04:30 JPY Industrial Production (YoY) (Nov)
09:30 GBP Retail Sales (YoY) (Dec)
09:30 GBP Retail Sales ex-Fuel (YoY) (Dec)
09:30 GBP Retail Sales ex-Fuel (MoM) (Dec)
09:30 GBP Retail Sales (MoM) (Dec)
13:30 CAD Consumer Price Index (MoM) (Dec)
13:30 CAD Consumer Price Index (YoY) (Dec)
13:30 CAD Consumer Price Index – Core (MoM) (Dec)
13:30 CAD Bank of Canada Consumer Price Index Core (MoM) (Dec)
13:30 CAD Bank of Canada Consumer Price Index Core (YoY) (Dec)
14:05 USD FOMC Member Williams speech
14:15 USD Industrial Production (MoM) (Dec)
14:15 USD Capacity Utilization (Dec)
15:00 USD Michigan Consumer Sentiment Index (Jan)
18:00 USD Baker Hughes US Oil Rig Count

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