12/12/2017 - Investors Optimistic on Brexit Talks

GBP

Sterling steadied on Monday after posting its biggest daily drop in more than a month on Friday, with investors cautiously adding some long bets at the start of a week when Britain and the EU will sign off on a deal to move to the next stage of Brexit talks.

Latest positioning data showed hedge funds added to long sterling bets for a third consecutive week, in a potentially busy week for the British currency. A central bank meeting is scheduled for Thursday and a raft of top-tier data including for retail sales, inflation and jobs are also due this week.

Sentiment on sterling has improved slightly and investors have become a tad more hopeful for the short term, though trading has remained choppy since Prime Minister Theresa May managed to break the Brexit deadlock on Friday.

USD

The U.S. dollar weakened on Monday, weighed down by tepid inflation data from Friday’s jobs report, while safe-haven currencies the Japanese yen and Swiss franc gained after an explosion rocked one of New York’s busiest commuter hubs.

Jobs data for November released on Friday showed still sluggish wage growth, even as job gains grew at a strong pace.

The Federal Reserve is widely expected to raise interest rates at its two-day policy meeting that will end on Wednesday. Investors will be watching for discussion around disappointing inflation for indications on how many further hikes are likely next year.

Consumer Price Index (CPI) data on Wednesday will be a key data focus for further clues on price pressures.

Key Announcements

09.30 – GBP – CPI YoY; Forecast the same as previous at 3.0%

13.30 – USD – PPI MoM; Forecast the same as previous at 0.4%