What’s been happening?

Pound Sterling – UK Markets 

The British pound staged a decisive recovery against both the dollar and the euro on Friday but recorded modest losses for the week. On Friday, the UK’s Office for National Statistics reported that retail sales rose by 1% on a monthly basis in January following December’s 0.7% contraction and beat the market expectation for an increase of 0.2% by a wide margin. On a yearly basis, the annual growth rate advanced to 4.2% from 3.1%. “In the three months to January 2019, the quantity bought increased by 0.7% when compared with the previous three months,” the ONS added.

On Brexit-related headlines, Irish Foreign Minister Simon Coveney told reporters that the EU would respond generously if the UK were to request an extension but added that it was unlikely that quest would come from the UK. Meanwhile, citing a UK official, Bloomberg reported that the UK Brexit Secretary Stephen Barclay and the European Union's Brexit negotiator Michel Barnier were planning to continue Brexit talks on Monday. 

US Dollar – US Markets

The dollar came under pressure in the second half of the day amid dovish Fed commentary on Friday and weakened against its major rivals and dragged the US Dollar Index back below the 97 handle. Nevertheless, the index gained 0.3% on a weekly basis. 

Atlanta Fed President Raphael Bostic argued that the Fed was in no rush to arrive at neutral rates and repeated that he was favouring one rate hike both in 2019 and 2020. Additionally, in an interview with The Wall Street Journal, San Francisco Fed’s new president, Mary Daly, said that if the economy were to grow around 2% with the inflation staying near 1.9%, there wouldn’t be a need to hike rates in 2019.

The data from the U.S: on Friday showed that industrial production decreased by 0.6% in January to fall short of the analysts’ estimate for a 0.1% growth. On a positive note, the University of Michigan’s Consumer Confidence Index improved to 95.5 in the first estimate of February from 91.2 in January. “The early February gains reflect the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Fed's pause in raising interest rates,” Surveys of Consumers chief economist, Richard Curtin, noted. 

Euro – European Markets

The shared currency closed the day virtually unchanged against the dollar as well as the pound sterling. The only data from the euro area on Friday revealed that the trade surplus in December edged down to €17 billion from €19 billion in November. In the meantime, while speaking at an even, European Central Bank board member Benoit Coeure said that the ECB started to discuss the possibility of a new TLTRO and reiterated that the slowdown in the euro area was stronger and broader than they initially forecasted. 

What’s coming up? 

UK: The Rightmove House Price Index will be the only data featured in the UK economic docket.

US: President’s Day holiday in the U.S.  

EU: There won’t be any macroeconomic data releases from the euro area on Monday.