Global equities staged a recovery last week further to their worst selloff in two years. This morning, Asian stock indices rallied, with the Topix index climbing the most in six weeks as the JPY rally faded and US equities capped their best week in five years.
With equities recovering, the USD steadied last week with some underperformance against JPY in G10, and LatAm and EMEA in EM.
In the UK, attention will likely fall on reaction to PM May’s recent speech on a new security treaty, as well as the employment report (Wednesday) and Q4 GDP print (Thursday). Barclays Research expect the employment report to remain largely unchanged and the unemployment rate to move sideways at 4.3% for the sixth consecutive month, and GDP to be confirmed at 0.5% q/q.
Our traders note that with the May BoE meeting now c. 75% priced for a rate hike, GBP could be a little more sensitive to data than in recent times. GBPUSD support at 1.3980 short term ahead of 1.3765 and resistance at 1.4150 and 1.4275.
This week, inflation data in several countries and FOMC, ECB, RBA, Riksbank and Banxico policy minutes will be a focus. The FOMC minutes (Wednesday) will likely feel a little stale, as the January meeting occurred before the recent bout of volatility and the bi-partisan budget deal.
We expect a quiet day ahead with markets in Hong Kong and China closed for the Lunar New Year holiday and in the US for Presidents’ Day.