Last week we saw sterling test the upper end of its recent trading range as positive economic data continued to reinforce the declining probability of rate cut from the centre bank in the short and medium term. It was suggested at the January Bank of England meeting that we could see an economic bounce following the result of the general election. The UK’s economic readings last week saw manufacturing rise by the fastest pace since last April, retail sales increased, and inflation pushed higher, however the pace of wage growth slowed but is still surpassing inflation comfortably.

US Dollar strength continues to be the driving force in the market as risk aversion surrounding coronavirus dominates. The US Dollar Index (USD vs a basket of currencies) is near its 14-month range high whilst the US dollar is at highest level against the euro since mid-2017. Over the weekend, it emerged that the problem may be getting more serious as the World Health Organisation stated the window of opportunity to contain the virus was “narrowing”. In addition, Italian officials imposed strict quarantine restrictions in two northern “hotspot” regions close to Milan and Venice whilst South Korea has raised its coronavirus alert to the “highest level”. Economic concerns surrounding coronavirus centre around the impact to global growth as the supply chain are affected.

Looking to the week ahead, UK parliament returns from it recess with the focus being on the release of the UK’s mandate to negotiations with the EU on Tuesday and budget which will go ahead on 11th March.


  • German IFO
  • BoE Chief Economist Haldane Speaks in London

Following on from last week’s ZEW survey which showed a slowdown in both the current situation and expectations the market will look to the German IFO which focuses on manufacturers and wholesalers view on the economy.


  • UK CBI retails sales
  • US consumer confidence
  • Richmond Fed manufacturing

The CBI retail survey will give a first update on February consumer spending. In the meantime, economic data from the US in the form of the consumer confidence and Richmond Fed manufacturing will be monitored for a continuation of the positive trend seen of late.


  • US new home sales

The US new home sales are a barometer used to measure the health of the housing sector and a leading indicator of growth. New home sales expected to continue to grow albeit at a slightly slower pace.


  • US durable goods
  • US GDP

US economic data continues to take the focus as the durable goods and second reading of GDP hit the wires. The second reading for Q4 GDP may see a very modest upward revision to growth but is likely to be old news following the Fed Chair’s recent testimony in front of Washington and the upward revisions to data.


  • US personal spending
  • PCE deflator

The Fed’s preferred inflation measure is released today in the form of the PCE deflator. This is forecast to record an annual rise of 1.8% up from 1.6% in December but still below the 2.0% target. This would be constant with a cut towards to end of the year, a move above 2% could change the outlook.

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