Sterling strengthened against USD like most of its peers yesterday, but was towards the bottom of the group of G10 currencies. No headline data was released, but Bank of England Governor Mark Carney gave a speech where he discussed the increasingly murky outlook for the global economy, which he concluded was likely to continue to grow. UK media ran disparate headlines on the speech, with the Guardian describing him as saying “Brexit is the first test of a new global order” while the Telegraph reported Carney had dropped “Project Fear”. Ultimately the speech added little to the outlook for BoE policy, which remains contingent on the outlook for Brexit. This morning’s news included comments by senior civil servant and Brexit negotiator Olly Robbins, who reportedly made remarks suggesting that Theresa May intended to threaten a delay in Brexit to compel Tory Eurosceptics to vote for her deal.  Today at 09:30 GMT inflation data will be released.


EURUSD reached yet another low yesterday after six consecutive days of losses, but managed to rally throughout the afternoon.Yesterday’s Ecofin meeting in Brussels, which is attended by the Finance Ministers of all EU countries, featured a German-French coalition that attempted to convince other member states of a shared budget to strengthen the European manufacturing sector. The budget would first focus on innovation, research and public infrastructure. In theory, this should lead to a more efficient allocation of fiscal investments across the bloc, which can provide a boost for the Eurozone’s growth potential. For now, the reaction of the euro remains muted as there is still a long way to go before such a budget would make its impact. In keeping with this theme, we will see Eurozone Industrial Production figures today at 10:00 GMT.


After eight days of consecutive increases on the DXY dollar index, the greenback finally took a break yesterday. Headlines from the White House helped ease tensions in financial markets. Donald Trump signaled that he might be willing to extend the trade truce beyond the March 1st deadline, while rumors circulated about President Xi meeting with top US delegation on Friday. The perceived risk of another Government shutdown also receded somewhat, after Trump said it was unlikely in the wake of the recent bipartisan efforts, while criticising Democratic lawmakers. Federal Reserve Chair Jerome Powell stuck to his recent neutral position on monetary policy in a speech, while describing economic conditions as broadly “solid”. Treasuries fell over the course of the day while the S&P Index broke through its 200-day moving average for the first time since early December. January wage and inflation data will be out at 13:30 GMT.


The loonie recovered half a percentage point against the US dollar, ranking in the third position among winners yesterday. The currency also benefited from the risk-on sentiment prevailing in markets amid global trade tensions clearing. In addition, oil rebounded from a two-weeks low after Saudi Arabia pledge to deepen output cuts, offering extra support. The currency has been trading on subdued levels lately as per the dovish tones of the Bank of Canada and the lack of support from crude oil markets. Should the trade talks continue to advance, this might be a chance for the loonie to rebound.