18/01/17 - Pound Rallies Following Theresa May's Brexit Speech 

GBP

The Pound gained significant ground against its major counterpart’s yesterday afternoon when Prime Minister Theresa May used her much-anticipated speech to announce her priorities for Brexit negotiations.

May promised to push for the "freest possible trade" with European countries and to sign new deals with others around the world whilst confirming that the UK "cannot possibly" remain within the European single market. The prime minister also announced Parliament would get to vote on the final deal agreed between the UK and the EU.

Theresa plans to maintain the common travel area between the UK and Irish Republic and implement "control" of migration between the UK and the EU. It was not her intention to "undermine" the EU or the single market, she added, but she warned against a "punitive" reaction to Brexit, as it would bring "calamitous self-harm for the countries of Europe and it would not be the act of a friend".

The UK’s inflation was reported to have increased to 1.6% earlier on in the session due to rising air fares and food prices.

EUR

Yesterday afternoon an influential member of the US Federal Reserve’s rate-setting body said that Donald Trump’s economic policy could lead to a faster pace of monetary policy tightening.

Lael Brainard believes that if the US President-elect’s policies lead to higher inflation at a time when the US is approaching full employment, the Federal Open Market Committee (FOMC) could be forced to raise interest rates to combat rising prices.

Key Announcements

09:30 – GBP – Average Earnings is forecast to increase to 2.6%

09:30 – GBP – Claimant count change is expected to increase to 4.6K

13:30 – USD – Consumer Pricing Index is expected to increase to 0.3%

13:30 – USD – Core Consumer Pricing Index is expected to remain at 0.2%

20:00 – USD – Fed Chair Yellen Speaks