IFX Market Report
Monday 15th January 2018

Market Report

Sterling started week two marked by political jitters but it soared on Friday to the strongest levels against the dollar since the EU referendum in June 2016, after it was revealed that the Netherlands and Spain were open to a softer Brexit deal for Britain.

The pound flew as Bloomberg reported Spanish and Dutch foreign ministers had agreed to work together for a Brexit agreement that maintains close ties between EU and Britain. However, this may not be as significant as the rise would suggest. Two nations’ open suggestion from a possible twenty-seven is unlikely to guarantee a softer Brexit – Although a welcomed boost to negotiations

Tomorrow will see the release of a variety of UK inflation indices, the key being the CPI as an indicator for the Bank of England sets inflation as its policy target. Investors will also be on lookout on Friday as UK retail sales data are due for December, it’s expected that the Christmas period will deliver disappointing results.

GBPEUR opened at the day’s low of 1.1223. GBP steadily strengthened throughout the session, only euro positivity hampered a greater gain. The pair closed on the day’s high of 1.1269

GBPUSD opened at 1.3546 and didn’t look back. The pound took advantage of a weakened dollar and marched on to close at the day’s high of 1.3689

Worldwide News

In Europe, the euro climbed to a three-year high on Friday after German Chancellor Angela Merkel’s conservatives and rival Social Democrats reached a breakthrough in coalition talks. This reignited the euro’s rally which has recently been driven by expectations that the European Central Bank may quicken the pace of it’s trimming of the bulky economic stimulus.

In the US, the dollar was handed a variety of data releases on Friday but failed to have any significant effect. US CPI data for the year kept in line with forecasts at 2.1% for December but CPI ex food and energy rose to 1.8% against 1.7% indicated in November. Retail trade rose 0.4% in December not quite matching November which grew by 0.9% but matching forecasts. In addition, the budget deficit narrowed to $23.2bn in December, from $27.3bn in the previous year.

EURUSD opened at 1.2064 gained shortly after. The pair seemed to settle in the afternoon hitting highs just before close at 1.2148. During Asian trading hours, the euro continued to climb and opened today’s session at 1.2217