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No Brexit updates means the market is looking elsewhere

By Hamish Muress

The government will wake up this morning to the unfortunate news that Nissan has decided to produce one of its newest lines in Japan instead of Sunderland. Meanwhile Downing Street is determined to create a cross Brexit working group to create a unified approach to the Irish Backstop before Theresa May goes back to Brussels to renegotiate the date of which has still not been set. In some welcome news however, the annual MP conference in Saint Anton (February half term) has been cancelled as the worryingly large pile of legislation required to leave the EU builds up. With the lack of actual Brexit developments the pound suffered last week with the focus back on fundamentals; manufacturing PMIs dropped on Friday. Services data and construction data follows suit at the start of the week and if again Brexit doesn’t dominate headlines these data releases should prove significant.

The USD managed to roll into the weekend (and the start of the week) on the front foot following the surprising jobs figures released on Friday. Chief market analyst Donald Trump also pointed out that the Dow Jones had its best January in 30 years ‘We have, by far the strongest economy in the world’. The jobs report comes as a bit of a surprise which shows that the labour market has been resilient to the recent government shutdown. The rally in the dollar however isn’t a surprise given the large sell off the day before due the extensive dovishness of the Federal Reserve.

Confidence in the Eurozone and the Euro is still suffering and Friday’s data struggled to set the market a light. The only glimmer of hope could come from the fact that core inflation for the whole Eurozone picked up to a whopping 1.1%. This week may not be much better though with retail sales expected to suffer as a result of the hectic Black Friday deals in November.

If there is a week to watch out for the Aussie dollar it is this week with a raft of data and meetings. Building approvals, trade balance, retail sales and the Reserve Bank of Australia meeting are all crucial in particular. Most significantly will be the RBA who are expected to follow the example of central bank counterparts elsewhere and confirm that soft global growth is weighing down on their outlook.

The Loonie continues to welcome the rally in oil prices with open arms as prices hit 2019 highs with the sanctions on Venezuela take effect. This move from the US is similar to the sanctions imposed on Iran last year and whilst Venezuela production isn’t the largest in the world it does have some of the largest reserves and oil fields.

The Kiwi has managed to hold its own against its US counterpart off the back of the strong labour figures out of America on Friday. Of note this week will be the Global Dairy Auction which always plays an impact on the New Zealand dollar.