What’s been happening?

Pound Sterling – UK Markets 

The British pound posted small gains against both the dollar and the euro on Monday. However, today’s market action looked like a technical correction rather than a decisive move driven by fundamental developments or data. 

Before she revealed her Brexit Plan B in the House of Comments, a spokesman for British Prime Minister Theresa May told reporters that the PM continued to have “genuine” conversations with lawmakers and that she would set out those conversations to the Parliament. “The PM has been clear that Britain will leave EU on March 29,” the spokesman reiterated and added that they would try to keep the disruption in a no-deal scenario to a minimum. Meanwhile, the EU’s Chief Brexit Negotiator, Michel Barnier, said that they were open to working again on the political declaration but added that the withdrawal agreement on the table was the best possible deal and that they needed to now focus on the future relationship. On other Brexit-related headlines, Germany's Economy Minister Peter Altmaier stated that he was optimistic that a hard-Brexit can be avoided while repeating that the German government was prepared for all the possible scenarios.

While presenting her Brexit Plan B before the House of Commons, PM May announced that they would adopt a more flexible and open negotiation strategy in the second phase and said that they would make commitments to N. Ireland in a way the Parliament could accept. May further stated that they would waive the application fee for the EU citizens to register in Britain. 

US Dollar – US Markets

The greenback stayed relatively quiet on Monday as the trading volume thinned out in the second half of the day due to the Marin Luther King Jr. Day holiday in the United States. The US Dollar Index, which measures the greenback’s value against a basket of six major currencies, preserved last week’s gains and closed the day flat. 

Euro – European Markets

The shared currency stayed virtually unchanged vs the dollar on Monday and weakened slightly against the pound sterling as investors refrained from making large bets ahead of this week’s critical ECB meeting.

In its monthly report, Germany’s Bundesbank noted that the German economy grew at a muted pace in the last quarter of 2018. “According to provisional figures presented by the Federal Statistical Office, real gross domestic product grew by 1.5% in 2018 as a whole compared with the previous year. Growth in aggregate output thus weakened noticeably as compared with the robust acceleration of 2.2% in the previous year,” the Bundesbank said in its publication. Additionally, the monthly report published by the Destatis showed that the Producer Price Index (PPI) in Germany declined by 0.4% on a monthly basis in December and brought the annual rate down to 2.7% from 3.3% in November compared to analysts’ estimate for an increase of 3.2%.  

What’s coming up? 

UK: The UK’s Office for National Statistics will publish its monthly employment report, which will include average earnings, claimant count change, and the ILO unemployment rate figures. The ONS will also release the public sector net borrowing data on Tuesday.  

US: Existing home sales will be the only data featured in the U.S. economic docket on Tuesday.   

EU: The ZEW will release the economic sentiment data for both Germany and the euro area.