Euro a touch firmer

While equity markets remained under pressure on Friday and core bond yields continued to head south, somewhat surprisingly the euro gained ground against the dollar to close out the week trading at almost $1.11 (having started it at around $1.10). The Bank of England’s decision to keep interest rates unchanged helped sterling, which strengthened against both the single currency and the dollar over the latter part of the week and kicks off this morning trading at around 84.25p and $1.31 respectively. Today, the EU and the UK will separately lay out what they expect from the forthcoming negotiations on a new relationship and they may well be on different pages at the outset

The Chinese central bank has responded to the fall-out from the coronavirus by injecting liquidity into the banking system overnight, which is also being well received by the markets generally with European stocks opening in positive territory this morning and US equities looking like they’ll do the same later

The Vice-Chair of the Fed, Richard Clarida, says the US central bank is “looking into how (the coronavirus) translates into the outlook for Chinese growth, for global growth and for how it impacts the US”, noting that “if this were to result in, say, a one or two-quarter slowdown in growth, that’s probably not something that changes the big picture”

The US economy continued to grow at a steady and solid pace at the end of 2019, with GDP increasing by 0.5% for a third consecutive quarter in Q4 and by 2.3% on the same quarter of 2018

In contrast, the Euro area economy grew at a very modest pace in the fourth quarter of last year, with GDP increasing by just 0.1% after a gain of 0.3% in the third quarter (within this, the French and Italian economies actually contracted in Q4), while separately the annual rate of headline inflation ticked up for a third month running in January to a still well below target 1.4%

Data due this week includes manufacturing and services PMIs in the main economies today and Wednesday respectively, while Friday sees the release of the US employment report for January