Yesterday saw a carrot and stick strategy from the UK Prime Minister May and Chancellor Hammond. May said that she wanted a bold and ambitious agreement between the UK and EU and Hammond said that the UK would find a way to compete if it didn't get a deal. It was interesting to note that German Finance Minister Schaeuble an elected politician of an EU member state said that he will do his best to make the relationship between the EU and Britain as close as possible. On the other hand Eurogroup President Dijsselbloem said that the UK will be totally outdated and impoverished with massive unemployment in 20 years’ time. The UK shopper will have a chance to show their view on Brexit this morning at 9:30 when UK retail sales data is released.
As expected the ECB didn’t change interest rates or its QE policy but at his press conference Draghi said that he was still concerned about providing support to the European economy as “underlying price pressures remain subdued”. He also saw no convincing upward trend in underlying inflation (the recent rise in headline inflation to 1.1% is mainly down to the oil price rise), and these overtly dovish comments helped to weaken the Euro initially before it bounced back later in the day.
Overnight comments from Fed Chair Yellen were construed as slightly less hawkish than her recent utterings and the USD slipped a little overnight. Today's the day we see President Trump inaugurated, some analysts suspect his “honeymoon period” with the voters has already ended as his approval rating is already around the 40% level and there are anti Trump protests arranged for today as well. The market will review his speech (supposed to be a short one) for clues to his plans for the future and it is expected that he will talk about jobs and the economy. It's time to see what Trump will actually do.
The CAD has been soft as the thought of NAFTA renegotiations start to take centre stage whilst the AUD has been remarkably resilient in the face of lower commodity prices. The Yen managed to gain some ground back with a weaker dollar and overnight Chinese GDP came in at 6.8% and in line with its broad 6.5%-7% range.