18/01/2019 - Pound Rises To Two Month High

GBP

The British pound rose to a two-month high against the euro on Thursday, extending recent gains on growing expectations that Britain can avoid a no-deal Brexit. In a turbulent week for British politics, Prime Minister Theresa May’s Brexit deal suffered a heavy defeat in parliament but she won a subsequent vote of confidence, removing some political uncertainty for now. Although a multitude of options remain on the table, including fresh elections or even a second referendum vote, market analysts believe the risks of a hard no-deal Brexit have receded considerably despite the headlines.

The Labour Party could back a second Brexit referendum if its proposals for leaving the EU are shunned by the government and a no-deal scenario looks likely, Labour leader Jeremy Corbyn said on Thursday.

EUR

Weak euro zone data pulled the single currency lower. Inflation data for the trade bloc showed price pressures receding further from the central bank’s target, complicating the situation for the European Central Bank which currently expects to raise interest rates later this year.

The single currency has fallen 1.7 percent over the last week, kicked off by reports that the German economy grew by 1.5 percent in 2018, the weakest rate of expansion in five years.

USD

The U.S. dollar ticked up on Thursday after stronger than expected economic data reports. The number of Americans filing applications for jobless benefits unexpectedly fell last week, pointing to sustained labour market strength that should continue to underpin the economy. The Philadelphia Federal Reserve said on Thursday its barometer on U.S. Mid-Atlantic business activity increased more than forecast in January, suggesting resilience in the region’s manufacturing sector amid trade tensions between China and the United States.

Key Announcements

09.30 – GBP: Retail Sales MoM; Forecast at -0.8% against previous of 1.4%