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Sterling ticks higher as UK/EU discussions continue

By Jake Trask

The pound is higher this morning with GBP/USD approaching the 1.31 level on the back of ongoing Brexit negotiations between the UK and the EU. As talks between the two sides continue a planned parliamentary vote scheduled for Wednesday on Theresa Mays withdrawal agreement has been pushed back a week as May tries to hammer out an agreement that will be palatable for Brexiteer backbenchers. Away from Brexit we have Bank of England Governor, Mark Carney discussing the latest BoE Inflation Report with the Treasury Committee tomorrow. GBP/USD trades at 1.3085.

There has been positive developments over the weekend between the US and China over trade. President Trump tweeted that the planned imposition of higher tariffs on Chinese exports was being delayed as the two sides get closer to finding an agreement over the issue. Equity markets around the world are up on the news with commodity currencies also posting gains. Data-wise this weeks big domestic event is US Advance GDP figures for the fourth quarter with an annualised 2.6% eyed, down from Q3s 3.4%. USD/JPY is at 110.62 with EUR/USD continuing to trade around the 1.1350 handle.

Friday's inflation figures from the Eurozone are this week’s big event with overall CPI expected to tick up to 1.5% from 1.4% and the core level which strips out food, fuel, alcohol and tobacco expecting to hold steady at 1.1%. Holders of the shared currency will still be reflecting on last week’s woeful German Manufacturing PMI which posted its worst number since Dec 2012. The 47.6 seen follows on from the previous months 49.7 as the German economy continues to struggle with a slowdown in China. GBP/EUR trades at 1.1520.

The Aussie dollar is starting this week on the front foot with AUD/USD up to .7150 as positive comments from Trump re: trade bolster the local dollar. This week’s big event from Down Under is Wednesday night’s quarterly Private Capital Expenditure figures with an increase of 1.1% expected. AUD/USD sits at .7160 with GBP/AUD at 1.8260.

Friday saw soft Retail Sales figures from the Canada with December seeing another reduction in spending on the high street/online. A fall of -0.5% followed on from Novembers -0.7% which will likely add to the argument that the Bank of Canada should keep interest rates on hold. Wednesday see inflation numbers from Ottawa with annualised CPI expect to stay just below target at 1.9% y/y. GBP/CAD trades at 1.7160.

The Kiwi dollar caught a bid this morning as Retail Sales numbers from New Zealand beating expectations coming in 1.7% higher for the quarter. This has helped push NZD/USD higher this morning with extra upward pressure applied by the positive comments from Trump re: trade. GBP/NZD is at 1.90.