urrencies particularly leveraged to the economic cycle, such as the Swedish Krona and the Australian and New Zealand dollar, performed particularly poorly. The absence of good news from the US-China trade negotiations contributed to spooking investors and sending them to the safe havens, as did a raft of mostly weak European country-level data. Meanwhile, there is also no progress in the Brexit negotiations as the clock rounds down, though Sterling managed to keep pace with the Euro.

Macroeconomic data is relatively light this week. Focus will continue to be on political developments, including the resumption of trade talks between the US and China and further votes on Brexit amendments in the UK. In the US, inflation data out on Wednesday will inform trader expectations as to the prospect of further 2019 interest rate hikes.

Major currencies in detail

GBP

The Bank of England met last Thursday and issued a fairly dovish assessment of the state of the UK economy. However, the uncertainty surrounding Brexit and the possibility of a ‘no deal’ outcome continue to focus the attention of currency markets. The absence of any news on this score meant that Sterling tracked the Euro very closely against all other major currencies.

This week we will get fourth-quarter GDP (Monday) and inflation (Wednesday) data. Most of the market action could, however, happen on Thursday as the British Parliament is scheduled to vote on a variety of amendments to the Brexit negotiations, albeit this looks likely to be delayed.

EUR

We saw a spate of mostly weak Eurozone data out last week, including soft German industrial production and factory orders in December. As 10-year German yields head back towards zero, the Euro was unable to hold onto the 1.14 levels against the Dollar and fell towards 2019 lows around the 1.13 mark.

We still think that the recent weak patch is temporary, and the combined effect of still strong labour market data and extremely stimulative monetary policy rules out any possibility of a near-term recession. We are, however, keeping a very close watch on Eurozone data.

USD

The Dollar sailed past some fairly weak second-tier economic data last week. While no single factor can account for the rally in the greenback, the absence of unambiguously good news in any of the open fronts (Brexit, China trade deal…) meant jittery investors sought the safety of safe havens and the Dollar benefited.

The main focus this week, aside from the possibility of a breakthrough in the trade negotiations with China, will be the inflation numbers for January, out on Wednesday. An upside surprise in the core number could lead markets to put back some hikes in their expectations for Fed moves in 2019.