Sterling managed to claw back, and hold on to, it’s losses at the end of last week after a mid-week flash crash in Asian trade caused the pound to tumble. The sudden flash crash was likely caused by Apple Inc, the worlds most valuable company, slashing its quarterly revenue forecast for the first time in more than 15 years, due to fewer iPhone upgrades and dwindling sales in China. This spurred on talk of slowing global growth and investors flocked to less risky assets, such as the Japanese Yen which immediately soared after the news. The pound had a good end to the week however, after UK services data for December came in stronger than expected, leading to renewed confidence in the UK economy.
The Euro remained fundamentally weak due to further doubts over the state of the Eurozone economy. This was fuelled by CPI figures on Friday showing that inflation remained unchanged in December, staying at its current low levels.
The week ahead
GBP – Today sees the return of MPs to Westminster as the debate regarding Brexit is set to start again. A vote on the withdrawal deal is due next week. The deal is expected to be voted down in Parliament, which will be mostly priced in to the markets, with a second vote expected in the coming weeks. If we see any push towards the deal being accepted or the chances of a No Deal Brexit increasing, then expect the pound to move. On the hard data front, Industrial and Manufacturing Production data, both out on Friday have the potential to move GBP crosses but the main release of the week will come in the form of GDP, also released on Friday.
EUR – On Thursday the European Central Bank (ECB) will be releasing the minutes from their December meeting. In December the ECB ended Quantitative Easing (QE), showing faith in the economy and strengthening the single currency. This move however was seen as a step too soon by many analysts. If this opinion is mirrored by any of the ECB members then expect uncertainty and Euro weakness.
USD – The ISM Non-Manufacturing PMI numbers, released this afternoon, is the first major release for the greenback this week and could cause some volatility for USD crosses. Hints from members of the Fed should however dominate dollar markets this week, with a lot of speculation as to whether the Fed will slow down the pace of interest rate hikes this year. There will be speeches from three Fed members on Thursday, including chairman Jerome Powell.