What’s been happening?

Pound Sterling – UK Markets 

The pound sterling struggled to find demand on Monday and continued to weaken against the dollar and the euro. The day’s only data from the UK revealed that the business activity in the construction sector expanded at a weaker pace than expected in January with the ISH Markit’s PMI slumping to 50.6 and missing the analysts’ estimate of 52.4. Commenting on the data, “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity. Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity,” Tim Moore, Economics Associate Director at the IHS Markit, said.

Meanwhile, following his meeting with British lawmakers on Monday, Martin Selmayr, Secretary-General of the European Commission, said that lawmakers were 'inconclusive' on whether any EU assurances could win the Parliamentary support for the Brexit deal and added that the EU was right to start no-deal preparations back in December 2017. Later in the day, the EU’s Chief Brexit Negotiator, Michel Barnier repeated that they would not renegotiate the Withdrawal Agreement. “Backstop = only operational solution to address Irish border issue today. EU ready to work on alternative solutions during transition,” Barnier further explained via Twitter.     

US Dollar – US Markets

Boosted by a more-than-1% increase in the 10-year Treasury Bond yield, the dollar outperformed its major rivals on Monday and the US Dollar Index extended its rebound to erase all of the losses it suffered last week following the FOMC announcements. 

The data published by the U.S. Census Burau revealed that new orders for manufactured goods in November decreased by 0.6% to $499.2 billion. On a positive note, however, “New orders for manufactured durable goods in November, up following two consecutive monthly decreases, increased $1.8 billion or 0.7 percent to $250.8 billion,” the publication read. On the other hand, the ISM NY’s Business Conditions Index dropped to 63.4 in January from 65.4 in February. “The Six-Month Outlook increased slightly after the 16.3 point drop reported in last month. Outlook increased to 58.3 in January, up from 57.1 in December. The six-month outlook has been a reliable short-run guide for current business conditions over time,” the ISM-NY noted.    

Euro – European Markets

The shared currency weakened against the dollar while posting small gains vs the British pound on Monday. The Sentix Investors Confidence dropped to -3.7 in February to show that the sentiment continued to deteriorate in the euro area and fell short of the analysts’ estimate of -0.6. “We note a renewed decline of the sentix overall economic index for the Euro zone by 3 points to +3.1. The situation values, with their sixth decline as well, are primarily responsible for this” Sentix said. “The situation in Germany is no different: the overall index and the current situation are declining for the fourth time. The loss of momentum remains remarkable.”

According to other data released by the Eurostat, the PPI in January declined by 0.8% on a monthly basis and brought the annual rate down to 3% from 4% recorded in December to further weigh on the euro. 

What’s coming up? 

UK: The IHS Markit will release the Services PMI report on Tuesday.

US: The ISM and the IHS Markit’s non-manufacturing PMI data and the IBD/TIPP Economic Optimism Index will be featured in the U.S. economic docket.

EU: The Eurostat will publish December retail sales data alongside with the IHS Markit’s Services and Composite PMI figures for Germany and the eurozone.