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Yesterday, Theresa May delivered a speech to outline details of the government’s plan for Brexit. The shape of the plan is built around 12 principles for a clean Brexit and included a call for the UK to leave the single market, avoid the EU’s immigration rules and being subject to the European court of justice.
In the run up to the speech, the pound shed value as rumors leaked that May was set to call for the UK leaving the single market. However, Sterling was boosted by confirmation from the Primer Minister that the UK parliament in both houses will get to vote on the final deal. In addition, May’s optimism helped to remove pound shorts for now although Sterling is by no means out of the woods, with the main risk being for negotiations to become fractured and lead to a more disorderly Brexit. At present, there is a lack of appetite to sell the pound and focus could shift away from Brexit and upcoming political risks within Europe.
Data to come
Today we will get further feedback from the UK economy with the UK labour market report for November. It is expected that unemployment will remain unchanged at 4.8% but average earnings could fall slightly to 2.5% from 2.6%. Later, we have US CPI inflation data, with expectation that core inflation will tick higher, and also December manufacturing production which is likely to push higher too.
Friday’s focus on Trump’s inauguration
The next focus for the market will be on the Trump inauguration on Friday. The dollar lost some ground yesterday as Trump noted in an interview that the USD is too strong and mentioned that China is weakening its own currency. This Friday, the market will be looking for clues as to what to expect from the Trump presidency.
