Will trying plan 'A' again work?

Sterling strengthens despite PM May giving little fresh information in her Brexit speech ahead of today’s labour market report.

Previous Day's Market Highlights

The main event of the day passed as expected when Prime Minister May delivered her Brexit plan B to parliament, however it seemed to look a lot like plan A which was voted down by a historically large margin last week. The PM’s speech gave relatively little information, though Mrs May did indicate that she was not, and had never contemplated, changing the Good Friday Agreement to avoid the requirement for a backstop relating to the Irish border while also ruling out the possibility of a second referendum. In addition, May indicated that she will seek input from voices outside the government throughout the next stage of negotiations as well as commenting that the EU are unlikely to allow an extension of article 50. Despite the run of the mill speech, the pound gained around 0.4% against the dollar and euro in the aftermath, as markets continued to price a softer Brexit.
 
Away from the pound, economic data and trading activity was limited as price action was hit by the loss of US trading desks due to a public holiday. Barring the early morning Chinese GDP figure, in line with forecasts at 6.6% growth for 2018, market participants were given little food for thought. Hence, most other G10 currencies remained tightly bound to their current ranges though a modest strengthening of the dollar was evident with the dollar index chalking up a fifth straight day of gains.
 
In other markets, European equities closed in the red, losing around 0.25% despite a surge late in the trading day. US equity markets were closed for MLK day. Finally, oil prices also remained largely unchanged as market participants continued to digest global economic concerns with GDP figures pointing to a slowdown in China.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1335 1.1410 1.1018 3.44%
GBP/USD 1.2868 1.3000 1.2440 4.31%
EUR/USD 1.1353 1.1570 1.1280 2.51%
GBP/AUD 1.8055 1.8190 1.7613 3.17%
GBP/NZD 1.9150 1.9214 1.8603 3.18%
GBP/CAD 1.7158 1.7392 1.6756 3.66%

Today's Market Highlights

Today’s economic calendar is much busier, with the re-opening of US trading desks also likely to add to trading volumes. The main highlight for investors is likely to be the monthly US labour market report which, despite the Brexit related uncertainty, has remained firm in recent months. Expectations are for earnings to have once again increased by 3.3% on a 3-month-on-year basis, their fastest pace since the financial crisis and firmly outpacing inflation. The other components of the report are also likely to remain broadly in line with the previous month, with unemployment likely to remain steady at 4.1%. Of course, the direction of the pound will also be determined by any Brexit-related headlines.
 
Elsewhere, other economic data in the European and North American sessions is of a lower tier, with only German economic sentiment figures likely to make significant waves across the markets. Expectations are for a decline to -18.4, the most pessimistic level for the index in 3 months. Overnight, the release of CPI inflation from New Zealand is expected to show inflation slowing to 0% on a quarter-on-quarter basis, while remaining steady at 1.8% on a year-on-year basis.
 
Finally, the ongoing US government shutdown as well as the first day of this week’s World Economic Forum in Davos may attract some attention from investors, especially if the stalemate in the US shows signs of a deal being brokered. No central bank speakers are scheduled this week with both the Fed and ECB into their blackout period ahead of their upcoming policy rate decisions.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Average Earnings - Inc. Bonus (3m/y) 3.3% 3.3%
9:30am GBP Unemployment Rate 4.1% 4.1%
9:30am GBP Claimant Count Change 20.0k 21.9k
10:00am EUR German ZEW Economic Sentiment -18.4 -17.5
10:45pm NZD CPI (y/y) 1.8% 1.9%