‘Plan B?’

STERLING

GBP/USD is nursing a small loss in Europe this morning having risen to a three-month high on Friday at 1.3214. Investors continue to fret around the risk of a no-deal Brexit with reports over the weekend suggesting Ireland have ruled out any changes to the backstop.

Chairman of the 1922 committee, Graham Brady, has tabled an amendment to the backstop arguing it should be replaced by ‘’alternative arrangements’’ believing that it will have both the support of MP’s while simultaneously providing Theresa May with ‘’enormous firepower’’ to negotiate with Brussels. Tomorrow will be a key day in parliament as lawmakers are set to vote on several amendments to May’s Brexit deal.

Data wise, lending figures are out on Wednesday followed by PMI on Friday.

US DOLLAR

The Dollar Index hit a three-week high on Thursday at 96.68 but went into free-fall on Friday where it dropped to a near two-week low of 95.75. Losses were attributed to a broad rally in risk sentiment on hopes that the US and China were nearing a trade agreement.

Looking ahead, there is plenty for the Dollar to look forward to with US and Chinese officials due to meet in Washington for trade talks mid-week and the jobs report on Friday.

EURO

The European Central Bank stood firm on policy on Thursday although they downgraded their assessment of risks to the outlook which are now seen to the downside. The Euro fell in response but rallied soon after as Mario Draghi seemingly played down the prospect of additional targeted longer-term refinancing operations (TLTRO’s). Data impulses were mostly negative, including soft Euro Zone PMI and German IFO.

Euro Zone confidence indicators and German CPI figures are out on Wednesday, Euro Zone GDP and German retail sales on Thursday and Euro Zone CPI on Friday.

JAPANESE YEN

Moves in the Japanese Yen were limited last week with USD/JPY stuck in a 109-110 range. Friday’s risk rally provided a brief weight on the Yen while the Bank of Japan did not change policy but did lower their inflation forecasts.

Retail sales are due tomorrow, followed by industrial production on Wednesday and PMI on Friday.

AUSTRALIAN DOLLAR

The Australian Dollar rose sharply on Friday, boosted by reports that suggested the US and China were moving closer to a trade agreement. The move reversed losses seen on Thursday after Aussie jobs data disappointed. AUD/USD crept higher again this morning to a one-week high of 0.7205.

NAB confidence indicators are out tomorrow, followed by CPI on Wednesday and PPI on Friday.

NEW ZEALAND DOLLAR

The New Zealand Dollar was boosted by the stronger-than-expected Q4 CPI data released on Wednesday and renewed optimism surrounding global trade. NZD/USD has extended above Friday’s peak to a fresh six week high of 0.6873.

Trade figures tomorrow are the only notable release this week.

CANADIAN DOLLAR

The Canadian Dollar finished Friday on the front foot where USD/CAD dropped to a one-week low as rising oil prices provided a boost. Domestic impulses were less supportive however as retail sales and manufacturing sales missed forecasts.

Bank of Canada Governor Poloz stressed that the pace of futures rate increases will be data dependent.

GDP and producer prices are out on Thursday followed by PMI on Friday.

SWEDISH KRONA

The Swedish Krona fell on Friday following a pretty dismal retail sales report for December. EUR/SEK spiked above 10.3 and has continued to edge higher this morning to a fresh one-month high at 10.3385.

Consumer confidence data is out on Wednesday followed by manufacturing PMI on Friday.

NORWEGIAN KRONE

The Norges bank left the key policy rate on hold on Thursday, as was widely expected. They also reiterated that the balance of risks suggests the next increase will most likely be in the first quarter – some economists had expected rate guidance to be pushed back. The Norwegian Krone rose in response with EUR/NOK slipping to a six-week low of 9.6880 although the pair moved higher earlier today as oil prices fell sharply.

Looking ahead, retail sales are out tomorrow, followed by manufacturing PMI and unemployment on Friday.