The pound remains on the front foot from last week, trading around 1.13 against the euro to start the new week. The pound rose 1.3% in the past 7 days, mainly as a result of easing fears over a no deal Brexit, and also as investors price in the increasing probability of a second referendum. The pound also touched 1.30 against the US dollar last week, however, has since retreated to open this morning in the 1.2860’s.

Prime Minister Theresa May will reveal plans to parliament today, this will outline the shape of the government's "Plan B" Brexit deal. With this, the hope that lawmakers will unite behind the proposed changes, an outcome that would ultimately be welcomed by markets and provide some certainty for the future.

The Week ahead:

The main factor for the pound will be the next instalment of Brexit, if parliament can unite behind a plan, we should see further gains from the pound. On the data front the main release is labour market data due for release on Tuesday at 9.30. The forecast is for average earnings to remain the same at 3.3%, and unemployment to remain at 4.1%. On Wednesday MPC member Broadbent will be speaking at London business school.

The main event for the euro is the European Central Bank rate meeting on Thursday at 12.30. Although no change in policy is expected the markets will be watching what is written in the statement and what president Mario Draghi says in his press conference after. The German ZEW economic sentiment is due for release on Tuesday at 10.00, forecast to fall from -17.5 to -18.8, this indicates the economic health of europe’s largest economy slowing down.

For the US dollar, Manufacturing and Services PMI for January will be the headline release, due out on Thursday. Both are forecast to decline slightly, manufacturing to 53.5 from 53.8, and to 54.2 from 54.4 for services. Retail sales data was due to be released last week, however the Governments shutdown is now affecting departments which compile economic data. There is a chance data could be releasing this week and if so could impact the dollar.

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