GBP - British Pound
Sterling started last week on the front foot, but was very quickly bought back down to earth by Brexit uncertainty and speculation of an impending interest rate cut by the Bank of England. To add salt to it's wounds, Friday's UK retail sales figures reported a very poor negative 0.6% versus expectations of a positive number. This only added weight to the argument that the retail sector in the UK is in a period of turmoil, with many of the traditional big hitters in the industry sector continuing to struggle. There has been a clear shift in consumer habits over the last few years, and this was supported by the online retailer Boohoo.com reporting strong profit figures last week. The traditional names such as Debenhams didn't have the same fortune though.
Currently, odds of a 25 bps rate cut by the BoE on 30th January sit at almost 70% according to the latest poll by Bloomberg. To add to this, market participants are beginning to price in two rate cuts by the central bank by the end of 2020. With Brexit rhetoric continuing to dominate the economy and keep it subdued, this seems like a sensible plan until more stability is restored and negotiations complete.
Sajid Javid and Boris Johnson added fuel to the Brexit fire over the weekend. The Chancellor stated that the UK may stray away from EU rules after Brexit. The prime minister also stated that the UK will not freely allow low skilled migrant workers to move into the country from the day after Brexit is confirmed in December 2020. This only raised concerns that the EU-UK trade negotiations remain fraught and the chances of negotiating a deal in it's entirety by end of 2020 will be very difficult.
The data calendar remains light this week, with no data out today. Tomorrow sees some tier 2 employment data from the UK, and all eyes remain on Friday's Flash composite PMI data, which may provide further fuel to the BoE's rate cut argument.
Oil prices are on the ascendancy after Libyan warlord Khalifa Haftar blocked oil exports from the part of the country he controls. This has taken 800,000 barrels of global supply away from the market and pushed WTI prices close to 60 USD a barrel. The US dollar has remained buoyant after positive US retail sales and consumer confidence numbers last week, though US data overrall has missed the mark in recent times. Today is a bank holiday in the US, which will keep things quiet, while Donald Trump and other world leaders descend on Davis for the World Economic Forum.
China is expected to pump more than 200 billion Yuan into the market ahead of the Chinese New Year in February, in order to keep prices in range and maintain liquidity in the market ahead of the spring festival. The Chinese GDP was released in line with expectations at 6% last week, and the Chinese government provided further support to the markets by suggesting that it would continue to support it's economy with tax cuts and policy arrangements. Retail sales and Industrial production also came out in good spirits in China.
Data remains light this week with focus on Canadian Interest rate and inflation announcements on Wednesday. US release home sales numbers on Tuesday and jobless claims data on Thursday.
1.1660 - 1.1725 ▼GBP/USD:
1.2955 - 1.3035 ▼GBP/AUD:
1.8805 - 1.8970 ▼GBP/CAD:
1.6860 - 1.7005 ▼GBP/NZD:
1.9520 - 1.9680 ▼