What’s been happening?

Pound Sterling – UK Markets 

The British pound started the week on a weak note and suffered losses vs both the dollar and the euro as the disappointing macroeconomic data releases weighed on the currency. The data published by the UK’s Office for National Statistics on Monday showed that the real GDP expanded by 1.3% on a yearly basis in January (preliminary) following December’s 1.5% growth rate and fell short of the analysts’ estimate of 1.4%. On a quarterly basis, real GDP growth dropped to 0.2% from 0.6% in the third quarter. “Business investment decreased by 1.4% in Quarter 4 2018, the fourth consecutive quarter in which there has been a decrease in growth,” the ONS noted in its publication. “GDP growth was estimated to have slowed to 1.4% between 2017 and 2018, the weakest it has been since 2009.”

Other data from the UK revealed that the industrial production and manufacturing production contracted by 0.5% and 0.7%, respectively, on a monthly basis in December and the trade deficit (non-EU) edged down to £3.642 billion in the same period to miss the market expectation of £3.592 billion. Regarding the quarterly performance, “Production output fell by 1.1% in Quarter 4 (Oct to Dec) 2018, compared with Quarter 3 (July to Sept) 2018, due mainly to a fall of 0.9% in manufacturing; this is the first time since Quarter 1 (Jan to Mar) 2009 that all four main sectors have fallen during a quarter,” the ONS explained.

Meanwhile, British Prime Minister Theresa May’s spokesman said that the meaningful vote on Brexit was not expected to take place this week and repeated that they would take all the necessary steps to ensure that Britain could leave the EU on time. 

US Dollar – US Markets

The US Dollar Index advanced to its highest level of 2019 on Monday as other major currencies struggled to find demand. Furthermore, a strong rebound witnessed in the U.S. Treasury bond yields provided an additional boost to the greenback. After gaining more than 1% in the day, the 10-year T-bond yield closed 0.8% higher. In an interview with Fox News, White House senior adviser Kellyanne Conway said that the U.S. and China were moving closer to a trade deal and added that President Trump was planning to his Chinese Counterpart Xi ahead of March 1 deadline to improve the risk sentiment and fuel the T-bond yields’ upsurge. Later in the day, in her first public speech, Federal Reserve Board Governor Michelle Bowman said that she was comfortable with the Fed’s current monetary policy stance.    

Euro – European Markets

The euro dropped to its weakest level since mid-November against the dollar and recorded modest gains against the pound sterling as investors couldn’t find a reason to return to the shared currency in the absence of significant macroeconomic data releases from the euro area on Monday. Speaking at the Eurogroup meeting, Eurogroup head Mario Centeno argued that the economic slowdown in Europe was caused mainly by political risks and explained that the euro area fundamentals were still stronger than they were before the crisis. 

What’s coming up? 

UK: Bank of England Governor Mark Carney will be speaking at an event at 13:00 GMT on Tuesday.

US: The U.S. economic docket will feature the NFIB’s Business Optimism Index and JOLTS job openings. Later in the day, FOMC chairman Jerome Powell’s and Fed members Geroge’s and Mester’s speeches will be looked upon for fresh impetus.

EU: There won’t be any macroeconomic data releases from the euro area on Tuesday. Bundesbank President Jens Weidmann is scheduled to deliver a speech in the European morning.