Brexit uncertainty continues to take its toll, with the pound closing last week at 1.1260 against the euro and 1.2758 against the US dollar. This last week saw the third consecutive week of losses for sterling as caution grows among investors ahead of Parliaments vote on the Brexit agreement next week. In the build up to the vote on the 11th, it is likely we will see further volatility as headlines arrive from Westminster. The US dollar saw weakening across the board as further tensions grew over trade with China. This has been resolved this morning, however the agreement to not raise tariffs will remain for the next 90 days.
The Week Ahead:
Brexit politics will continue to dictate the pounds movements in the coming week as Theresa May tries convincing parliament her deal is the best solution. On the data front the main release for the pound will be the three Purchasing Manager Index’s. Manufacturing will be released on Monday at 9.30, Construction is out Tuesday and is the only index forecast for a fall, Services will be released on Wednesday.
It is a relatively quiet week for the Euro, although there is a continued risk of Italy’s budget causing volatility. The main data release for the Eurozone will be retail sales for October, forecast to show a rise of 0.2% when released on Wednesday. President of the European Central Bank, Mario Draghi, will be making a speech on Wednesday at 8.30. Investors are likely to pay close attention for any mentions to the outlook of future monetary policy.
For the Dollar, non-farm payroll will be the big mover for the market, expected to show a 200k rise in November when released on Friday at 13.30 GMT. A positive surprise would boost the dollar as it might suggest upside risks to inflation and higher interest rates. Another important release for the US Dollar is ISM Manufacturing, forecast for a slight decline to 57.5 from 57.7 for November, due to be released on Monday at 16.00 GMT.