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AETOS Market Commentary 18/02/2019

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EURUSD

The Euro made little to no changes on Friday, closing at 1.1292(-2 pips) against the greenback. The Euro continues to trade along the lines of global risk trends, finishing as either the fourth or fifth top performing major currency for the fourth consecutive week in a row. The dollar rose early Friday, leading the pair to a fresh 2019 low of 1.1233 later easing amid up roaring equities and easing government bond yields, a sign of improved market's sentiment. The better market mood came by the hand of US President Trump, who said that the US is closer than ever to reach a deal with China. He also declared a National Emergency on the border with Mexico and signed a congressional bill to avert another government shutdown. But the dollar's weakness had another reason: there were a couple of macroeconomic releases that was not positive, triggering an alarm on those interested in the greenback. Not only Retail Sales posted their largest decline in roughly a decade, but according to Friday releases, Industrial Production fell by 0.6% in January, and Capacity Utilization shrank to 78.2% from 78.8% previously. On a bright note, the preliminary Michigan Consumer Sentiment Index for February came in at 95.5, beating expectations and well above the previous 91.2. This Monday the US will be on holiday while there are no data scheduled in Europe. Typically, neither the Eurozone nor German ZEW Surveys much interest in any given month. However, over the past two releases, the Euro has moved in excess of +/-0.2% around the release, suggesting that attention has indeed returned to the ‘high’ ranked events. Certainly, provided the context of a deteriorating economic backdrop for the Eurozone, traders are proving more interested in proximal trackers of growth in order to try and ply additional insight into the European Central Bank’s next policy move.

GBPUSD

The Pound rose and appreciated to 1.2887(+90 pips) against the greenback. The British Pound is just about keeping its poise against a range of currencies, especially with a strong US Dollar, with less than two weeks until UK Prime Minister Theresa May has to present another Brexit deal to the Parliament yet again. The British Pound has struggled throughout the week and will close in negative territory but moves lower remain muted as sentiment continues to suggest either a soft deal or an extension of the Brexit date (March 29). MPs voted down a series of non-binding amendments on Thursday leaving PM until February 27 to get concessions from the EU and support from the House. If this does not happen, it is possible that Parliament will take over the process and try and formulate a plan that can command a majority vote The cable pair is trading above 1.2880 level on Friday as the UK retail sales surprised on the upside while the UK Prime Minister suffered another defeat in the House of Commons late on Thursday. The UK House of Commons voted by 303 to 258 against a symbolic motion resolving the Brexit deadlock. Voting in House of Commons reflected a revolt from the ultra-conservative Eurosceptic members of parliament in her Conservative party that voted against the move. Although there are no many headlines regarding Brexit recently, the UK government is supposedly working on amendments to Brexit deal to be able to win the support of stubbornly reluctant parliament. The UK Secretary of State Andrea Leadsom said that the EU knows what the UK wants on the Irish border backstop issue and the government is determined to keep a no-deal Brexit possibility on the table. The UK retail sales rose unexpectedly strongly by 1.0% over the month in January after falling sharply in December, marking the worst Christmas sales in a decade. The core UK retail sales rose 1.2% m/m in January as well.

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Source: https://www.aetoscg.com/uk/market-commentary
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