PMI Data to Be Released Today as the Steel Tariff Fallout Continues

German Retail Sales (YoY) (Jan) was released coming in at 2.3% v an expected 3.3%, from -1.9% previously, which was revised to -0.2%. Retail Sales (MoM) (Jan) was -0.7% v an expected 0.8%, from -1.9% previously, which was revised to -1.1%. This data is usually volatile but on this occasion, it has surprised to the downside marginally. EURUSD moved lower to eventually test 1.22512. UK PM May gave a prepared speech on Friday on Brexit progress and ongoing negotiations with the EU. Of particular interest was her policy on trade regulations and the Northern Irish border. In that regard, one of the takeaways from her statements was that there is an option for a customs partnership between the EU and the UK. She said that to avoid a hard border, an agreement on customs was needed. The best option involved a highly streamlined customs arrangement with simple requirements for the movement of goods. She promised that the UK would maintain the high standards of the EU including maintaining environmental standards to a level at least as high but also wanted flexibility on this and the fisheries policy. In her speech, she made it clear that the level and type of market access of some services will not be the same as pre-Brexit. Her key tests for Brexit success were: 1. Implementing the decision of the British people 2. Reaching an enduring solution 3. Protecting security and prosperity 4. Delivering an outcome consistent with the kind of country we want to be 5. Strengthening the Union “I want to be straight with people – we all need to face up to some hard facts’ – ‘in certain ways our access to markets will be less than it is now’ – we can’t have all the benefits without all the obligations”. Market reaction to her speech was indecisive with GBPUSD moving higher to 1.38017, then selling to 1.37604, before recovering to starting levels around1.37880. EURGBP moved lower to 0.89155 but then rallied to 0.89488. FTSE traded around 7088.00. UK Construction PMI (Feb) was released and came in at 51.4 v an expected 50.5, with a prior number of 50.2. This data is based on a survey of purchasing managers, with a reading above 50 indicating expansion and below 50 indicating contraction. This number has been trending down since a high of 64.7 in February 2014. GBPUSD moved lower from 1.37876 to 1.37606 upon this data breaking. It can see a seasonal pick up around this time, heading into summer and due to increased construction activity but like-wise, any failure for this to take place could indicate a downturn in the sector. Eurozone Producer Price Index (YoY) (Feb) was 1.5% v an expected 1.6%, from 2.2% previously. This data represents the change in the price of finished goods and services sold by producers. A number lower than the consensus shows that the value of goods has decreased but represents a saving for consumers. EURUSD moved higher after this release from 1.22741 to 1.22979. …