Sterling reached pre-Brexit levels against the US Dollar this morning with the exchange rate set just under the $1.38 mark. The British currency strengthened as media reports indicated that the Netherlands and Spain have agreed to push for a soft-Brexit deal, which would keep Great Britain close to the European Union. With no UK data due out today, investors and traders are waiting for tomorrow’s UK inflation data release.

Carillion, one of the UK’s largest construction companies, collapsed after talks with banks and the British government didn’t prove fruitful. Market experts believe that the company’s liquidation will greatly affect its tens of thousands of employees and will have an impact on several UK-based subcontractors. In the Eurozone, the trade surplus in November rose more than expected according to data published by Eurostat.

Pound Sterling – UK Markets

Today, the Pound jumped against the US Dollar, gaining 0.6% in value, with the exchange rate set at $1.38. On the contrary, Sterling fell against the Euro, losing 0.25% in value, with the exchange rate set at €1.12.

News in the UK is dominated by Carillion’s declaration of insolvency. Carillion, which is one of the UK’s construction giants, is to be put into liquidation with immediate effect after talks between the firm’s administration, the government and banks failed during the weekend. Carillion is involved in many public services projects which means that the government will have to provide any necessary funds to keep critical services operating.

A report by Rightmove, one of the UK’s top property websites, showed that the prices of London homes, available for sale in January, hit the lowest level since 2009. The survey indicated that the average asking price for a home in London was £601,000. The price is 3.5% lower than it had been a year ago. By contrast, home prices in the rest of the UK rose by 4% on average, with asking prices being under the £300,000 mark.

US Dollar – US Markets

The US Dollar dipped against the Euro with the exchange rate set at €0.81. The US Dollar Index (DXY), which measures the strength of the Dollar against six major competitor currencies, fell by 0.19%, coming in at 90.75. The US financial markets are closed today as Americans celebrate Martin Luther King Day.

The Dollar was sold-off as traders preferred to buy Euro and Japanese Yen as the European Central Bank (ECB) and the Bank of Japan (BoJ) are preparing to normalise their monetary policies. Investors have started to diversify their holdings in foreign currency as many central banks from countries across the globe are scheduling the raising of their benchmark interest rates.

The danger of a government shutdown is imminent as the current government spending authorisation expires on Friday 19th January. The break down in negotiations on a potential immigration deal, after President Donald Trump used harsh language against immigrants coming from Africa, has made Democrats harden their positions. While Republicans hold control of the Congress, Democratic votes would be needed for any broader budget agreement.

Euro – European Markets

The Euro surged against the US Dollar with the exchange rate set at $1.22. Traders bought the single currency believing that the ECB will tighten its monetary policy and that German political leaders have reached a coalition agreement.

Eurostat released data regarding the Eurozone’s trade balance in November. According to the released data, the seasonally adjusted trade surplus in November stood at €22.5bn. The figure was better than what analysts had been expecting, spreading optimism for the Eurozone’s improved exports. In November 2016, the trade surplus stood at €23.8bn. The value of exports from the Euro-bloc to the rest of the world increased by 7.7% in November, on an annualised basis.

A Bloomberg survey showed that a majority of economists believe that the German GDP will rise by 2.3% in 2018. The figure is improved by 0.1% when compared with the previous Bloomberg survey regarding the German economy. According to them, the chance of a recession happening in 2018 is as low as 5%. They also forecast a 1.8% rise of the German GDP during 2019.

Other Currencies – Highlights

Sterling dropped against the Australian Dollar, trading just under the $1.73 mark. The most important data release coming from Australia this week is December’s unemployment and participation rate which will be published on Thursday. A report by NAB said that the unemployment rate would remain at 5.4%, while another 15,000 jobs are expected to have been added to the total number in December.

The Pound fell against the New Zealand Dollar, trading at 1.88 NZD. According to data from Statistics New Zealand, food prices fell 0.8%, on a monthly basis, in December. Despite the recorded drop in the last month of the year, food prices were up by 2.3% when compared to the same month in 2016. Later in the day, data regarding electronic card retail sales in December will be published.

Sterling inched lower against the Swiss Franc, trading at 1.32 CHF. The State Secretariat for Migration announced that the number of EU workers coming to Switzerland in 2017 stood at 30,799, almost half of the 60,957 recorded in 2013.