Excellent Run for the Pound in January

After an excellent run for the pound in January, Brexit optimism is already fading and as such exchange rates have stalled and begun to correct over the last week. Whilst the markets have seemingly all but priced out any expectation of a ‘no deal’ scenario, the reality of the situation is that a ‘no deal’ Brexit is still very much on the table. The EU is so far standing firm on any re-negotiations that May is attempting over the next few weeks before another parliament meaningful vote towards the end of February. On 13th February May will update the House of Commons on her progress and ion 14th MPs will get another say on amendments. With the PM standing firm on any second vote, the current default situation on March 29th is that the UK leaves with no deal in a disorderly Brexit if she cannot get her deal through parliament beforehand. The closer we get to the end of March without a deal, the more nervous the markets are likely to become of this situation, and all the recent gains could easily be wiped out again.

Whilst Theresa May goes back to Brussels, the new month will bring the usual host of data to absorb, including a Bank of England meeting and inflation update on Thursday. This morning we have already had UK Construction PMI which has posted a disappointing 50.6, down from 52.8 last month. Below is a list of the key releases to look out for the rest of this week:

Tuesday:
3:30am (AUD) – Interest Rate Decision
9:30am (UK) – PMI Services
10:00am (EUR) – Retail Sales
2:45pm (US) – PMI Services

Wednesday:
9:45pm (NZD) – Unemployment Rate

Thursday:
12:00pm (UK) – Bank of England Rate decision/inflation report

Friday:
1:30pm (CAD) – Unemployment Rate