Sterling was firmly on the back foot last week after Bank of England policy makers began to come out in numbers in support for looser monetary policy. Gertjan Vlieghe, an external Monetary Policy Committee member said his on whether to lower rates by 25 basis points to 0.5% would depend on survey data released towards the end of the month. Vlieghe previously gave a hawkish speech back in September 2017, which preceded the bank’s first rate hike in a decade just two months after. The pound has traded heavier in this morning’s sessions as it digests the latest Bank of England commentary. The probability of a rate cut by the central bank in January’s meeting has risen from 5.1% just 4 days ago to 50% this morning, as implied by fixed income markets. The next policy decision is scheduled for release on the 30th January. The data calendar now comes back to the forefront of markets minds after Brexit taking centre stage for the last few months. Today, at 09:30 GMT November’s economic growth data is released, with a mild 0.1% QoQ contraction expected, while the rest of the week holds top-tier data such the CPI inflation report on Wednesday and retail sales data on Friday.


The single currency has started 2020 as it ended the previous year, with relatively little volatility. Last week saw EURUSD trade within a 1.08% range as the greenback broadly firmed on geopolitical risk. This week’s data calendar is light for the single currency with CPI inflation data released throughout the back end of the week. European Central Bank speakers are more plentiful, however, with Villeroy speaking on Tuesday and Wednesday and the release of December’s monetary policy meeting minutes on Thursday. ECB President Christine Lagarde is due to speak in Frankfurt shortly after the release of the meeting minutes at 18:00 GMT. Meanwhile, risks of a flare-up in US-EU tensions are heightened this week as the Trump administration frees up some time following a narrow trade deal with China. Newly appointed trade official, Phil Hogan, is due in Washington on Thursday.


In a tweet on Tuesday, President Trump said he would sign a phase one trade deal in the presence of Chinese representatives on Wednesday of this week before travelling to Beijing at the end of the month to kick-start the talks for a second phase. Details of the narrow trade deal are still being translated and edited by both sides so are yet to fully filter into market pricing, but the dollar remains firm in light of fresh geopolitical risk stemming from the Middle East. In Tehran, anti-government protests continued for a second night after government officials admitted that the military accidentally shot down a Ukrainian jetliner last week. This week, outside of the renewed US-China optimism, the EU’s top trade official, Phil Hogan, flies to Washington on Thursday while the release of December’s retail sales data on Thursday is the standout piece of economic data stemming from the US calendar. Many believe that traction with US-China negotiations may allow the Trump administration the time to pivot their attention elsewhere, possibly reigniting tensions with the EU again over access to certain markets such as agriculture.


The loonie spent much of last week on the back foot as oil markets tumbled from recent highs. Last Wednesday, the DoE reported a sharp rise in US inventories yet again bringing heightened supply fears to market’s attention. The Canadian dollar found little support from the data calendar either with wage growth cooling in December from 4.4% to 3.8% YoY despite the job market continuing to tighten. This week, the calendar is fairly bare for the loonie with just the Bank of Canada’s business outlook survey due this afternoon at 15:30 GMT.



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