A quick spot check on the markets and heading through towards the European open on Monday shows the Pound is under pressure falling below 1.2000 against the United States dollar and as weekend press report suggested that Tuesday’s speech from the United Kingdom Prime Minister Theresa May, will have her outline the UK’s willingness to sacrifice single market and custom union membership, if no serious concession are made from Brussels on the freedom of movement of labor into and out of the UK in a post-Brexit environment.
At the moment, the Sterling is falling against both the United States dollar and the Euro and it appears now that we’re looking towards a hard-Brexit in the UK, hence Tuesday’s speech from Theresa May could potentially not be that market moving. Philip Hammond the UK chancellor over the weekend also talked to Sunday Press outlining that the most influential tool in the negotiations with Brussels could in fact be the UK’s corporation tax rate.
So effectively saying, if the United Kingdom does not get a good deal of access for the UK’s goods and services in what is UK’s main international export market, the UK could potentially be lowering its domestic corporation tax to draw business away from the continent and effectively weaken the Eurozone economy. Now, it remains to be seen how effective that strategy would be, but we’ll likely see a lot of rhetoric and comment from the European Union representatives this week as the World Economic forum takes place in Davos.
Now President elect Donald Trump, who’s due to be inaugurated this Friday is not attending the Switzerland conference this week. However, for the first time in history the Chinese President Xi Jinping is due to be making an appearance, so it remains to be seen what market is going to be looking for? Whether China would be engaging in these trade wars with the United States, exchanging tweets with the United States President or in fact becoming more of a global 21st century mature powerhouse. So market is looking for a sculling and stable message from the Chinese President over the next 5 days.
Looking at the calendar today, things are relatively quiet, but we do have US and UK inflation later this week, a couple of central bank speakers out of Switzerland and the European Union Monetary Policy meeting due on Thursday. Although, compared to last week the event risk seems to be heavier this week.
The Chinese Yuan seems to be in for a busy one, as focus will be drawn to the GDP and Industrial Production data release on Friday.
The Canadian dollar is expected to have a busy week, beginning on Wednesday with the scheduled release of the Bank of Canada Monetary Policy report, Overnight Rate and Rate Statement, which would be followed by the usual press conference. The Manufacturing Sales number is billed for Thursday. Things would be brought to a halt on Friday with the release of the Canadian CPI and Core retail Sales data.
The week will be a quiet one for the Australian dollar, with no scheduled event asides the Employment Change and Unemployment Rate that is billed for Thursday.