(11 February 2020)DAILY MARKET BRIEF 2:UK GDP and Powell’s testimony on agenda
Investors will also keep an eye on European Central Bank (ECB) President Christine Lagarde and Bank of England (BoE) Governor Mark Carney’s
speeches today.
The euro extended weakness to 1.0906 against the US dollar. The pair could settle near the 1.0900/1.0880 in the
continuation of the actual negative trend, but sellers may need a better conviction to push the single currency to the 2016/2017 depressed
zone of 1.08/1.03 against the greenback.
Cable trades rangebound near the 1.29 mark before a set of important data release in Britain
this morning. Today’s data could confirm an anemic growth in the four the quarter, and a stagnant industrial and manufacturing production
in December. The fact that business surveys in January hinted at a bounce in activity posterior to Boris Johnson’s victory may attenuate the
impact of soft production and growth data. But the optimism in surveys is now being eaten up as investors realize that the second - and the most
decisive phase of Brexit negotiations will likely continue weighing on businesses. In fact, avoiding an immediate no-deal Brexit didn’t
necessarily save the UK from walking out of the EU without a deal at the very end. There are some 20% chances for that happening and this risk is
clearly being underpriced by the market at the current prices. Hence, the risk of a decent unwind in Sterling remains real and the positive
skew in net speculative positions give room for a sizeable sell-off toward the 1.25 mark against the US dollar within the next couple of
months.
By Ipek Ozkardeskaya
