25/01/2019 - Pound Jumps To 10-Week High

GBP

The Pound surged after Northern Ireland's Democratic Unionist Party privately decided to back Prime Minister Theresa May's Brexit deal next week if it includes a clear time limit to the Irish backstop. Northern Ireland's DUP Party will support the prime minister's plan when she "toughens it up" and will accept the Irish backstop if there is a time limit.

The House of Commons will vote next Tuesday on alternative Brexit plans after it rejected the deal May negotiated with the EU, a development that pushed the bloc to brace for a no-deal Brexit in two months.

EUR

On Thursday European Central Bank President Mario Draghi acknowledged that economic growth in the eurozone was likely to be weaker than earlier expected due to the fall-out from factors ranging from China's slowdown to Brexit.

Their economy is already suffering its biggest slowdown in half a decade, raising questions over whether the ECB will be able to increase interest rates for the first time in a decade later this year as its current guidance indicates.

Draghi left guidance and interest rates unchanged at its meeting on Thursday. But Draghi's downbeat comments, including a reference to "downside" risks, will fuel market speculation that the bank will delay any rate hike, mirroring a more cautious approach by the US Federal Reserve, and may offer new cheap loans to banks.

Key Announcements

12.45 – EUR: ECB Interest Rate Decision; expected to remain unchanged at 0%
12.45 – EUR: ECB Deposit Rate Decision; expected to remain unchanged at -0.4%
13.30 – EUR: ECB Monetary Policy Statement & Press Conference