· Speaking Friday morning, Bank of England member Michael Saunders said one of the main guides as to where interest rates are likely to go next is the labour market. Saunders also suggested the recent fall in Sterling would probably lift inflation above the bank’s target this year.
· On what was a relatively uneventful day on the whole, Sterling rates were far from subdued. The Pound saw some solid strengthening in the morning session, perhaps buoyed by a report suggesting that the crisis in Northern Ireland’s parliament could delay the triggering of Article 50. However, moving into the afternoon Sterling rates saw a sharp depreciation as it emerged UK PM May had scheduled a speech regarding the government’s Brexit plan on Tuesday.
· US Data dominated the afternoon’s trading:
o Producer Price Index (PPI) m/m 0.3% (0.1% Exp)
o Retail Sales m/m 0.6% (0.5% Exp)
o Prelim UoM Consumer Sentiment 98.1 (98.6 Exp)
· These largely better than expected numbers did see the US Dollar briefly rally in FX space, however that proved short lived as the Dollar ended the day largely flat against it’s counterparts.
· Sterling has been hammered in FX space overnight and this morning as reports over the weekend suggested that UK PM May is ready to pull the UK out of the single market in order to secure her key objective of full control over immigration, with this ‘Hard Brexit’ strategy to be revealed in a speech on Tuesday. Currently GBP/USD is down some 1.22% (1.2040) and GBP/EUR 0.80% (1.1357) on the day.
· Further to these reports, over the weekend we also heard UK Chancellor Hammond suggesting that the UK could be forced to change its economic model in order to regain competitiveness should access to the single market be lost.
· Some more colourful commentary form US President-elect Trump over the weekend. This time Mr Trump called NATO “obsolete”, and also had a dig at the EU, suggesting that the EU was simple a “vehicle for Germany” and that he expected others to follow the UK’s lead.
· Very quiet day in prospect as the United States celebrates Martin Luther King Day.