Previous Day's Market Highlights
Sterling recorded solid gains to close out the week, adding 0.6% against the euro and dollar after January’s retail sales figures bounced back from a weak December. Sales grew at 1% on a month-on-month basis, well above expectations for a 0.2% increase, showing that an increase in disposable income combined with post-Christmas discounts tempted shoppers onto the high street last month. However, any increase in spending could be short-lived with the post-Brexit outlook for the UK economy remaining uncertain, exemplified by consumer confidence remaining at its lowest level since July 2013 in January. For the pound however, any positive news is a welcome distraction from the ongoing Brexit impasse, hence the bid tone into the end of the week.
Elsewhere, the eurozone’s trade surplus held steady at 15.6bln while consumer sentiment figures from the University of Michigan bounced back from their lowest level since President Trump’s election. Data showed confidence increasing to a level of 95.5, largely due to the government shutdown being brought to an end, as well as consumer’s being reassured by the Fed’s recent move to pause in raising rates.
Despite the positive data, the dollar weakened on Friday, in line with other safe-havens, as markets ended the week with a risk-on tone as President Trump signed a spending bill to avoid a 2nd government shutdown and markets grew more optimistic of a US-China trade deal being reached. While sterling was the best performing major, the Aussie, Canadian and Kiwi dollars all added around 0.5% to finish the week.
The risk-on mood continued in other markets, with equities in Europe and the US recording strong gains on Friday and US Treasury yields also rising. The pan-European Stoxx 600 added 1.5%, while the Dow Jones Industrial Average gained almost 2% - recording its 8th straight week of gains. Finally, crude oil prices remained underpinned by OPEC-led production cuts, with both Brent & WTI gaining more than 2%.
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Today's Market Highlights
With US markets closed today in observance of President’s Day, volatility is likely to be limited in most major currencies. Furthermore, with the US closed, the economic calendar is devoid of any major, market-moving data. Despite the lack of data, there are 2 interesting points to note. Firstly, the UK’s Brexit Secretary Steve Barclay is due to head to Brussels for a meeting with the EU’s Chief Negotiator Michel Barnier in an attempt to break the impasse over amendments to the Irish backstop. Though the meeting is unlikely to yield any material changes, it acts as a precursor to a meeting between PM May and EU Commission President Juncker due to be arranged for later this week,
Secondly, the German Bundesbank release their monthly report around 11 o’clock this morning. Though rarely featuring on the radar of market participants, the report may spark some volatility in the euro – especially if any comments differ significantly from recent speeches from the ECB. The ECB release minutes from their latest monetary policy meeting on Thursday afternoon.
Looking ahead to the rest of the week, calendar highlights include labour market reports from the UK (Tues) and Australia (Thurs) alongside the latest set of eurozone PMI (Thurs) and CPI inflation (Fri) figures. The main highlight however appears set to be the Fed’s Wednesday release of minutes from their latest meeting, with investors likely to closely examine the rationale behind the FOMC’s decision to pause their rate hiking cycle.
Today's Economic Calendar
No notable economic data is scheduled for release today. US markets will be closed in observance of President's Day.