Today’s trading session was characterised by broad-based Dollar weakness, with the trade-weighted index down about 0.6% to its lowest level since end-September. The under-pressure Euro is up 0.8%, with the EUR/USD cross back to 1.14 despite the release of data showing that the German IFO business climate index collapsed to 99.1 in January – its weakest point in two and half-years. This follows the release earlier this week of lacklustre German ISM manufacturing and ZEW economic sentiment indices and a dovish press conference by ECB President Draghi following yesterday’s policy meeting.
Sterling’s gains have been more modest with markets focussed on a likely series of parliamentary votes next week, which could provide some guidance as to whether the House of Commons can agree on a Brexit path after it flatly rejected Prime Minister May’s draft EU deal. MPs favouring a second referendum have decided at this stage not to put this option to a parliamentary vote but at the same time EU leaders are showing little appetite to delay the UK’s planned departure from the EU on the 29th March and re-start likely lengthy negotiations over a new deal.
