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Last week’s currency movements could potentially be a preview of what to expect for 2017. The US dollar showed sensitivity to Fed announcements after the release of December’s FOMC meeting minutes. Meanwhile, Sterling remained on the back foot and performed poorly in most currency pairings for the majority of the week. This was due to Brexit related headlines about the difficulties that lie ahead for the UK in its EU negotiations.
Sterling weakness continues this morning, whilst, EURUSD is starting the week with little change from where it closed last Friday.
The UK may not retain access to the single market
The main focus today will be on Theresa May after suggestions that the UK will give up its single market membership in Brexit negotiations. UK participation in the European customs union is also in question.
In response to Theresa May’s comments, Steve Baker of the Tory party actually stated: “This is a welcome clarification of a sensible position by the PM. We won’t be clinging on to bits of EU membership. The best outcome for the UK is an ambitious trade deal plus control over our laws, trade policy and borders. The PM’s interview is great news for the UK.”
Data to come
The week ahead will be sparse on macroeconomic data. In regards to the US dollar, the main release of note is Retail Sales data for December due out Friday afternoon. After a disappointing November figure, sales are expected to have put in a stronger performance during December, which should help to lift the dollar.
Regarding the Eurozone, German GDP for 2016 and Eurozone unemployment for November are the only highlights, meaning that the euro may not get much movement from the macroeconomics this week.
It’s a similar story in the UK, with monthly and industrial production data due out on Wednesday; but overall, Sterling remains vulnerable to further Brexit developments.
