The dollar the star performer

The dollar was the star performer last week – helped by a steady stream of positive economic data out of the US – strengthening against both the euro and sterling and kicking off this week with its gains intact trading at around $1.0950 and just below $1.29 respectively. Amidst this, the pound weakened somewhat against the single currency and opens this morning hovering around the 85p level

Equity markets fell on Friday albeit they ended higher on the week as a whole, while core bond yields dipped at the end of the week but they still finished up on their closing level the previous Friday (by the best part of 10bps in the case of US 10-year yields)

The ‘payrolls’ report on Friday rounded off a week of solid economic data in the US, with employment rising by 225k in January (from December), slightly ahead of the average monthly rate of job gains recorded in 2019.  The unemployment rate did tick up last month but this was due to an increase in participation in the labour market, while the annual rate of growth in hourly earnings picked up to 3.1%

The economic data out of the Euro area, in contrast, was more mixed, but a very sharp fall in industrial production in Germany in December (of 3.5% from November and 6.8% from December 2018) certainly caught most attention

The Sinn Fein tsunami dominated the general election here over the weekend, leaving plenty of uncertainty about the composition and policy agenda of the next government

The chair of the Fed, Jerome Powell, testifies to Congress on the US economy and monetary policy this week (Tuesday), and is likely to reiterate that the current level of interest rates is appropriate to sustain the economic expansion

Data due this week include GDP (Q4) in both the UK (Tuesday) and Germany (Friday) as well as CPI inflation (Thursday), retail sales and industrial production (both Friday) in the US