What’s been happening?

Pound Sterling – UK Markets 

The pound sterling weakened against both the dollar and the euro on Friday amid a lack of headlines hinting at progress in Brexit talks ahead of Tuesday critical meaningful vote on British Prime Minister Theresa May’s re-negotiated Brexit deal. Speaking in Grimsby, PM May argued that an extension of article 50 could lead to a second referendum and added: “We might never leave the EU if the second referendum is held, letting down voters.”

Later in the day, the EU’s Chief Brexit Negotiator Michel Barnier in a Twitter thread explained the EU’s new offer to the UK. “EU commits to give UK the option to exit the Single Customs Territory unilaterally, while the other elements of the backstop must be maintained to avoid a hard border. UK will not be forced into customs union against its will,” Barnier said. However, several news outlets quickly reported that the EU’s offer was already rejected by the UK and didn’t allow the currency to gather strength against its rivals. 

 US Dollar – US Markets

The U.S. Bureau of Labor Statistics on Friday announced that the nonfarm payroll in February increased by only 20,000 to miss the market expectation of 180,000 by a wide margin. Although the initial reaction put the greenback under heavy selling pressure, the underlying details of the jobs report helped the currency limit its losses. The publication showed that January’s reading got revised up to 311,000 from 304,000 and the unemployment in February fell to 3.8% from 4%. More importantly, wage inflation, as measured by the average hourly earnings, rose by 0.4% and 3.4% on a monthly and yearly basis, respectively. Despite the disappointing data, the US Dollar Index posted its highest weekly-close since mid-December.

Commenting on the labour market figures, White House economic advisor Larry Kudlow said that he was not paying much attention to the latest NFP report and argued that the low reading was caused by temporary factors such as bad weather conditions. Regarding the trade talks with China, Kudlow noted that sides were still negotiating over the phone.     

Euro – European Markets

The shared currency recovered a portion of Thursday’s losses against its rivals but this move seemed to be a technical correction as Friday’s economic calendar didn’t offer any data that could help the currency. According to the data published by the Destatis, factory orders in January contracted by 2.6% on a monthly basis to fall short of analysts’ estimate for a 0.5% growth.

Commenting on the European Central Bank’s dovish shift, Governing Council Member Ewald Nowotny explained that German GDP outlook and the recession in Italy was of “great relevance” for the ECB and announced that the details of the TLTROs would be announced in June. On the other hand, Governing Council member Francois Villeroy de Galhau adopted a more optimistic tone as he argued that the economic slowdown in the euro area was temporary. “The ECB wanted to show it can react without overreacting,” Villeroy added.    

What’s coming up? 

UK: The Bank of England will release the Consumer Inflation Expectations report on Monday and Policy Committee member Jonathan Haskel will be delivering a speech later in the day.

US: January retails sales will be the only data featured in the U.S. economic docket. 

EU: Industrial production, which is expected to rebound in January after contracting by 0.4% in December, trade balance, and current account data from Germany will be published on Monday.