The pound started this week on the front foot with a 0.45% advance against the euro being recorded. The pound has since retreated slightly to open this morning at 1.1110 against the euro and 1.2750 against the US dollar. Although there is not much data out to justify the pound strengthening, it is likely changing opinions in Westminster towards Theresa May’s Brexit deal has caused some movement. The foreign minister, Jeremy Hunt, said that the Brexit deal can be passed by the British parliament if the European Union provides clarification that the Northern Irish “backstop” will be temporary. Currently any news towards a more secure Brexit is improving the pound’s strength.

Key data releases:
This morning will see final manufacturing PMI’s from across the eurozone. The data, which came out as forecast for the month of December has been released from Spain, Italy, France and Germany. This comes ahead of services PMI’s and inflation data for the eurozone due out on Friday.

A quiet week for the pound, the only release for today is the Manufacturing PMI. Data was released at 54.2 ahead of the forecast 53.6, showing a growing market at the end of the year. Tomorrow will see construction PMI data released and Services PMI on Friday. As always Brexit will likely be the main driving force for the pound and any further updates will likely cause volatility.

Similar to the pound the US dollar will have a quiet week, with non - farm employment change and Manufacturing PMI due out tomorrow afternoon. Friday afternoon will also have speeches from Fed chair Jerome Powell and FOMC member Raphael Bostic. Volatility is likely during these talks as investors decipher any hint towards future monetary policy.

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