he common currency made a beeline for the 1.15 level against the US Dollar yesterday, with a general recovery in global stock markets causing investors to dial back safe-haven bets and buy back those currencies deemed riskier. We also saw some generally encouraging economic news in the Eurozone on Monday, which helped lift the currency on its way. Eurozone retail sales rose more-than-expected in November, while there was also a welcome upward revision in the October number.

This morning’s German industrial production numbers did, however, paint a slightly different picture. Production in the industrial sector of Europe’s largest economy crashed by 4.7% YoY in November (Figure 1), a much larger contraction than economists had pencilled in. This supports the suspicion that the economy of the bloc slowed in the final quarter of the year following an already underwhelming Q3.

Sterling gains tempered amid Brexit pessimism

A general improvement in appetite for risk also helped lift the Pound yesterday, although its gains against the US Dollar were tempered by ongoing concerns over Brexit.

UK parliament returned following its recess yesterday, with just one week to go until the critical parliamentary Brexit vote. Despite Theresa May insisting that she plans to seek additional ‘reassurances’ on the NI backstop for EU leaders, next Tuesday’s vote remains highly unlikely to pass. The debate on Brexit will recommence in the House of Commons on Thursday.

This week will see a handful of macroeconomic releases in the UK, although all pale in significance to Brexit. Governor of the Bank of England Mark Carney could shift the markets when he speaks on Wednesday afternoon. We will be looking out for any comments from Carney on the impact of a ‘no deal’ Brexit, and its possible implications for the UK economy and the Pound.

Canadian Dollar recovers on oil price rebound

Meanwhile, commodity currencies rebounded yesterday, buoyed by an upward move in oil prices. The Canadian Dollar has, in particular, been under heavy pressure in the past few months, with global oil prices crashing by around 40% since mid-October.

A recovery in oil has therefore been a very welcome development for CAD so far in 2019, with the currency retracting around 2.5% of its losses versus the US Dollar. This may, however, prove short-lived, with the Bank of Canada expected to downgrade its growth assessment this coming Wednesday.