The Pound plummeted on Friday, as the EU’s Chief Brexit Negotiator, Michel Barnier, gave the UK a warning that if the disagreements between the two sides persisted, a transition deal would not be a given. Barnier asked the UK for more transparency and mentioned there had been substantial disagreements over the terms of the transition period so far. In response to Barnier’s warning, UK Prime Minister, Theresa May has announced her plans for herself and her cabinet to give a series of speeches over the coming weeks, dubbed ‘the road to Brexit,’ in an attempt to set out a plan for life after leaving the bloc. The series of speeches will be begin with Foreign Secretary, Boris Johnson on Wednesday and will end with an address from Theresa May in the coming weeks. May is hoping these speeches with provide the public with reassurance as well as helping bring the Conservative Party closer together.
There is a quiet start to the week as there is no high tier data on the economic docket. Two members of the Bank of England Monetary Policy Committee are set to speak. The first will be Gertjan Vlieghe, who will be speaking about household debt at the Resolution Foundation. Whilst Ian McCafferty will be discussing the economic outlook and monetary policy in an interview conducted by Iain Dale.
On Tuesday, the UK are set to release the CPI figure for January. The figure is expected to down tick to 2.9%, from the 3% posted last month. Inflation hit a six year high for the November reading and started to shown signs last month of retracing back down. This will be a key figure the markets will be watching, as the Bank of England indicated last Thursday, they could be looking towards an earlier rate hike, possibly as early as May. However, if inflation shows further signs of easing, the hike could be pushed back to November when it was originally planned for. Across the pond, FOMC member Loretta Mester will be speaking at the Dayton Area Chamber of Commerce Government Affairs Breakfast on the economic outlook and monetary policy.
The US will be the markets main focus on Wednesday, as the latest reading of the CPI and Retail Sales figures will be released. US Inflation is expected to fall from the previous reading of 2.1% to 1.9% for January’s number, whereas Retail Sales will be expected to grow to 0.5% from 0.4% last month. If the figures released are better than expected, it is likely that the US stock market will face further pressures, which will see further flow into the Greenback, strengthening the currency again. The Eurozone will be releasing their flash GDP figure, expected to post 0.6%, whilst Germany will be releasing their individual Prelim Version of the figure, expected to also post 0.6%.
The focus will remain on the US on Thursday as the US releases their PPI figure for January. It is expected the figure will uptick from the previous reading to post 0.4%. The Empire State and Philly Fed will also be releasing their Manufacturing Index, expected to post 18.2 and 22.1 retrospectively. The Weekly Unemployment claims are expected to increase to 229k from 221k last week.
On Friday, the UK will be releasing the Retail Sales figure for January, expected to post 0.6%, an increase from the previous month’s bearish -1.5% reading. Across the pond, the US will release the Building Permits figure for January, expected to post 1.31m. The building permit figure provides a gauge as to the future construction activity within the US. The University of Michigan will be releasing their Prelim Consumer Sentiment and Inflation Expectations reports. The sentiment is expected to post 95.6, remaining static from the previous month’s revised figure.