What’s been happening?

Pound Sterling – UK Markets 

The pound sterling weakened modestly against both the dollar and the euro on Monday as the currency struggled to attract investors’ attention amid a lack of upbeat data releases and positive developments surrounding Brexit talks. Today’s data from the UK showed that after the manufacturing sector, the business activity in the construction sector contracted for the first time in nearly a year in February with the IHS Markit PMI falling to 49.5 from 50.6 in January. Commenting on the data, “The recent fears over the Brexit-related impacts on the sector were realised this month, as barring the weather-related blip in March last year, construction put in its worst performance since September 2017, with the PMI contracting to just below the no-change mark,” Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said.

Meanwhile, a spokesman for the European Commission announced that British Attorney General Geoffrey Cox and Brexit Secretary Barclay will be travelling to Brussels to talk with the EU’s Chief Brexit Negotiator Michel Barnier. Regarding Tuesday’s talks, Attorney General Cox explained that Brexit was complex and added that detailed negotiations could not be conducted in public. 

US Dollar – US Markets

The greenback continued to add value against its rivals on Monday with the US Dollar Index rising to its highest level in two weeks and recording gains for the fourth straight day. Although the latest data from the U.S. came in below market expectations, the currency preserved its strength as a more reliable alternative relative to its European counterparts.

The U.S. Census Bureau on Monday reported that construction spending in December declined by 0.6% to miss the market expectation of +0.2%. Moreover, the ISM-NY’s Business Conditions Index edged down to 61.1 in February from 63.4 in January. On a positive note, “The Six-Month Outlook increased for the second month in a row, rising 13.2 points to reach 71.5 in February. The six-month outlook has been a reliable short-run guide for current business conditions over time,” the ISM-NY said in its publication. 

Euro – European Markets

Ahead of this week’s critical meeting, at which the bank is expected to slash its growth expectations, the shared currency is having a tough time finding demand. The Sentix Investor Confidence for March improved to -2.2 from -3.7 in February and fell short of the analysts’ estimate of -3.1 but failed to help the euro show resilience against the dollar. “ While the situation values are falling for the seventh time in a row, future-oriented expectations are rising significantly by 7 points to -10.3,”  Managing Director Manfred Hübner said. “We are also measuring a similar development for Germany. The situation values lose for the fifth time to +20 points. Expectations, on the other hand, rise to -10.8 points.” Other data released by the Eurostat revealed that the Producer Price Index (PPI) in February rose 0.4% and 3% on a monthly and yearly basis, respectively. 

What’s coming up? 

UK: The IHS Markit will publish the February final Services PMI, which is expected to fall to 49.9. Also in the day, the Financial Policy Committee (FPC) Statement will be assessed for fresh clues on the potential negative impact of Brexit uncertainty on the stability of the financial system.

US: The IHS Markit and the ISM’s non-manufacturing PMI reports, new home sales, and building permits data will be featured in the U.S. economic docket on Tuesday. 

EU: The Eurostat will release the January retail sales data alongside the IHS Markit’s Services and Composite PMI figures.