Considering the momentous political events occurring around the British Isles and Ireland over the weekend, sterling has had a relatively quiet open to the week, trading slightly lower to reach fresh post-election lows against the US dollar. This week’s data will include critical gross domestic product figures for both January and the fourth quarter, released on Wednesday, the same day Mark Carney will testify to lawmakers from the House of Lords for the last time. This morning, Nicola Sturgeon is expected to give a speech in Brussels about Scotland’s European future after Brexit, and Boris Johnson is expected to announce a cabinet reshuffle on Thursday. Elsewhere, in a development that is probably, but not certainly, of limited significance for sterling, left-nationalist party Sinn Féin won the highest vote share in Ireland’s general election, and will reportedly seek a role in Government.
The single currency has stabilised this morning after depreciating 1.25% against the dollar over the last week. The data calendar is light for the euro this week and is predominantly filled by ECB speakers until German preliminary Q4 GDP is released on Friday just prior to the Eurozone wide index. Tomorrow, ECB President Lagarde speaks at the European Parliament in Strasbourg at 14:00 GMT, with board member and chief economist Philip Lane speaking in Berlin at 17:00 GMT. Lane’s tour continued on Wednesday with a fireside chat at the European Financial Forum in Dublin at 09:50 GMT.
The dollar has opened the week on the back foot against NOK and AUD, as well as many emerging market currencies, notably RUB, TRY, CNY and ZAR. Overnight China’s central bank began providing targeted lending aimed at enabling banks to provide cheaper and faster credit to businesses involved in combating the Coronavirus outbreak, and against shoring up risk appetite globally. Friday’s non-farm payrolls report was positive, showing the economy added 225,000 jobs in January, more than the consensus forecast of 155. This is above the broad trend of around 200,000 seen over the past decade, and significantly above the trend of the past 12 months. Average weekly earnings were up 0.2% on the month, slightly less than expected, and 3.1% year on year. The wage growth figures are enough to keep consumer spending growing, but nowhere near enough to turn heads at the Federal Reserve, which is unlikely to change its cautious monetary policy stance. This will be a busy week for the US data calendar, with the Fed’s Bowman and Harker speaking at 13:15 GMT and 20:15 respectively today. Later in the week Fed Chair Jerome Powell will testify to lawmakers on Tuesday and Wednesday. Inflation data will be released on Thursday, followed by retail sales on Friday. After the chaos of the Iowa Democratic primary last week, the US Presidential nomination process will move on to New Hampshire on Wednesday.
The loonie has joined the risk-on rally this morning after flirting with a key psychological level last week. Increased liquidity in the Chinese economy is providing the stimulus for the loonie rally despite oil markets not reacting in the same vain. WTI continues to slump this morning due to no clarification from Russia regarding further production cuts following last week’s emergency three-day OPEC+ meeting in Vienna. This week, the calendar is light for the loonie with data focusing on housing market data.