Across the channel, there were a few updates regarding Brexit with EU Chief Brexit Negotiator Barnier stating there is no possibility for frictionless trade between the EU and UK. In addition, the EU is demanding that its judges have the authority to rule on any post Brexit agreement. Does this provide a sign of how tough the talks could be post Friday?
Looking to the day ahead, there is some second-tier data from the UK in the form of CBI retail sales which would normally have very little impact on the British Pound, although with only 48 hours before the BoE rate decision, it could prove more interesting than usual. Currently there is a 58% probability of a rate cut on Thursday.
German IFO Business Climate Index Below Forecast, Weakening the Euro
It was a fairly quiet day in terms of major economic data yesterday with only the German IFO released, outlining a survey of manufacturers, builders, wholesalers, services, and retailers which is often used as a front-line assessment of the economy, providing a 6-month indication of sentiment. The headline German IFO Business Climate Index came in at 95.9 in January, weaker than last month and below forecast, resulting in widespread Euro weakness throughout the morning. What’s more, the 6-month expectations Index was down from previous month and also missed expectations with the President of the IFO Clemens Fuest stating that “the German economy is starting the year in a cautious mood”.
In Asia, stock markets continue to slide as there are no signs the situation stabilising with the death toll raising again overnight to over 100.
Across the pond, the market will be focusing on whether US data can continue its positive trend which could potentially result in a rate hike later in the year. The durable goods orders and consumer confidence will be monitored.