Sterling Dips, Dollar Gains

Euro GDP and Carney testimony are in focus today. Yesterday, the USD picked up and GBP dipped.

Previous Day's Market Highlights

The pound started the week off on the backfoot, retreating further from last week’s highs as concerns over the strength of PM May’s leadership and the tone of Brexit negotiations resurfaced. Sterling-euro fell below 1.14 and sterling-dollar below 1.41. The dollarrecovered ground against the euro as well, pushing the euro-dollar rate back below 1.24, supported in part by rising bond yields. 10-year US Treasury yields rose above 2.7%.
 
Buzzfeed reported last night that a government impact assessment found that the three most likely versions of Brexit—a soft Brexit with EEA membership, a free trade agreement with the EU, and a “no deal” reversion to WTO rules—would each result in lower growth than currently forecast over the next 15 years.
 
The kiwi dollar strengthened overnight after New Zealand unexpectedly posted a monthly trade surplus in December.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1325 1.1512 1.1197 2.72%
GBP/USD 1.3994 1.4346 1.3458 6.19%
EUR/USD 1.2355 1.2538 1.1915 4.97%
GBP/AUD 1.7391 1.7722 1.7098 3.52%
GBP/NZD 1.9210 1.9466 1.8613 4.38%
GBP/CAD 1.7318 1.7646 1.6757 5.04%

Today's Market Highlights

It’s a busier calendar day for the pound. Mixed mid-level UK releases this morning, include the latest Net Lending, Mortgage Approvals, and Consumer Credit figures, have so far had a relatively muted impact on the pound. Of greater interest will be BoE Governor Carney’s testimony before the Economic Affairs Committee this afternoon (15:30 GMT), which investors will watch for monetary policy clues.
 
This week will be key for seeing whether the euro can maintain its recent rally against the dollar. One factor is this morning’s Q4 GDP figures (10:00 GMT), which are expected to show that growth remained steady at 0.6% quarter-on-quarter and picked up to 2.7% year-on-year from 2.6% in Q3. Signs that the economy is continuing to strengthen could contribute to further euro gains.
 
Tomorrow, the Fed is expected to keep interest rates on hold when it announces it first policy decision of the year. Key therefore will be the guidance provided, particularly whether the Fed strikes a hawkish tone on hikes for the rest of the year and signals that the door is open for a March move.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Preliminary GDP QoQ (Q4) 0.6% 0.6%
10:00 EUR Preliminary GDP YoY (Q4) 2.6% 2.6%
10:00 EUR Economic Sentiment Indicator (Jan) 116.3 116.0
10:00 EUR Consumer Confidence (Jan) 1.3 1.3
13:00 EUR German Harmonised CPI YoY (Jan) 1.6% 1.6%
14:00 USD S&P/Case-Shiller Home Price Indices YoY (Nov) 6.4% 6.4%
15:30 GBP BoE Governor Carney Speaks
16:30 EUR ECB's Mersch Speaks
00:01 GBP Gfk Consumer Confidence (Jan) -13
00:30 AUD CPI YoY (Q4) 2.0% 1.8%

Caxton