Sterling was boosted by expectations that article 50 would be extended to delay the planned EU withdrawal.

The Euro was hit by a sharp correction on Friday amid on-going Euro-zone growth concerns while the dollar recovered some ground on positioning grounds.

Sterling was boosted by expectations that article 50 would be extended to delay the planned EU withdrawal if, as expected, the government loses this week’s key Brexit vote.

Risk appetite declined again in Asia on Monday following weaker than expected Chinese trade data for December which reinforced fears over Chinese and global growth conditions.

Equity markets moved lower and oil prices also retreated sharply with correction pressures after strong gains during 2019 adding to selling pressure.

ECB council member Nowotny stated that the narrative set out in December’s policy meeting remained valid and could still imagine an interest rate increase in 2019, although recent data had been worse than expected. Fellow member Makuch was less confident with comments that indicators were trending downwards and the Euro was unable to gain further support.

UK data was weak with a second successive decline in manufacturing production for November to give a 1.1% year-on-year decline and the goods trade deficit was wider than expected with a £12.0bn deficit. Construction data was above consensus forecasts while the monthly GDP estimate of 0.2% growth for November was also above consensus forecasts of 0.1%.

Sterling had already moved lower and was resilient after the data with significant gains ahead of the US open. There was increased speculation that the government would look to delay Brexit beyond March 29th which helped underpin the currency.

Late in the European session there were further reports that Article 50 would be extended which triggered a further Sterling advance with a push to 6-week GBP/USD highs above 1.2850 with EUR/GBP also retreating to 2019 lows near 0.9910.

Markets were braced for very volatile trading during the week ahead with Prime Minister May attempting to bolster support by warning that rejecting the Withdrawal Agreement would risk no Brexit. Sterling losses on Monday were limited by further speculation that an EU exit would be delayed until at least July with EU reassurances also expected later in the day. EUR/GBP did rally to the 0.8930 area with GBP/USD near 1.2830.

Economic Calendar

10:00Euro-Zone Industrial Production (Y/Y)(NOV, 2018)-1.40%1.20%
10:00Euro-Zone Industrial Production (M/M)(NOV, 2018)-0.70%0.20%
21:00NZIER Business Confidence (Q/Q)--30

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.