Yesterday saw the release of the European Central Bank’s March meeting minutes (say that quickly!). The ECB expressed a deep concern about the possibility of an all-out trade war with the US. They cited that these trade conflicts could negatively impact activity for all countries involved. Despite strong economic growth in the Eurozone the ECB expressed concern about financial conditions amid volatility in the FX markets, highlighting a particular issue with the continued strengthening of the Euro and the negative impact that this would have on inflation. Adding to the dovish minutes, comments by ECB's Coeuré, saying that the current monetary policy stance is appropriate, fuelled expectations that the central bank is more likely to maintain the status quo longer than anticipated. As a result GBPEUR hit a post Brexit high of 1.1568.

Prior to the release of the ECB’s dovish minutes, the EU19 industrial production data was released and came in below expectations. Industrial output in the Eurozone saw a monthly decrease of 0.8 percent during the same period.

Donald Trump appeared to row back a little on an imminent US-led attack on Syria yesterday when he tweeted that he did not say when action might take place. It could, he claimed, ‘be very soon or not so soon at all’. Nonetheless news reports note a considerable mobilisation of US air and naval resources towards Syria. In addition, the British Cabinet yesterday gave its backing for the UK to support the US. Reports suggest that this could take place either via the use of Gulf based submarines, or the UK’s base at Akrotiri in Cyprus to launch a strike on Syria. One issue is the specific nature of the targets. Trump’s warning tweet on Wednesday appears to have prompted the Syrian government to move its aircraft close to Russian resources in an attempt to discourage a US strike. Even so, a number of commentators are suggesting that action could occur this weekend. In terms of markets, the S&P500 index finished 0.8% up on the day yesterday. However, we would note that stocks appear to have been supported by President Trump’s suggestions that the US might be amenable towards restarting Trans Pacific Partnership trade talks in the foreseeable future. Oil prices remained firm with Brent hovering a touch below the $72/bl level.

The day ahead

With the economic calendar clear for the sterling Friday session, the focus for GBP traders has turned back to Brexit, and despite the gap between EU and UK negotiators, market participants are hopeful that a successful resolution will be found, and as was noted earlier, the UK and the European Union will start talks next week on their trade relationship after Brexit. As of now, the two sides stand divided on the key issues. The EU has rejected the UK’s proposals as cherry picking the best bits of EU membership and the UK says the EU is being too inflexible, according to Bloomberg. The British Pound could set new yearly highs next week if the trade talks begin on a positive note. On the other hand, signs of stress could derail the Sterling rally. We are pretty light on the ground for economic data releases today. The Eurozone trade balance figures are due at 10am before we head to the States for Michigan consumer sentiment index at 3pm. This afternoon Fed members Rosengren, Bullard and Kaplan speak.

Friday 13 is known for being the most unlucky day of the year, with many people fearing what the day entails. In 2018 we will have to negotiate it twice with 13 July also falling on a Friday. It is possible that the publication in 1907 of Thomas W. Lawson’s popular novel, the Thirteenth, contributed to the superstition spreading. In the novel, an unscrupulous broker takes advantage of the superstition to create a Wall Street panic on a Friday 13. Hopefully there will be no such panic in the FX markets today but with growing concerns of a Trade War expressed by the ECB yesterday it might be worth avoiding ladders, black cats and cracks in the pavement! Or, if you don’t believe in all that, give the Investec Dealing Desk a call on 0800 055 6339 to discuss managing the risk in a more pragmatic manner.