UK PM David Cameron flew the flag for Britain and Europe as the February EU summit began in earnest. Cameron sported his best salesman cap, debating fearlessly to convince the 28 member states to accept his recently announced reform package. He undoubtedly faced an uphill battle, but with Germany’s Angela Merkel fighting in his corner, there was hope some resolve would prevail. Meanwhile, there is more green than red on the screen as equities and commodity markets print gained across the board.

GBP

The market was unsure how the cable would react throughout the summit, so expect the currency to be treading water at best. Any hint of struggle within the halls of Brussels may prompt some short selling, as downside bias is still well in play. However, this is an important step for Cameron and will dictate whether he will fully back a vote to ‘stay in’ on the foundation of reformed EU membership status. Some pleasant data in the form of average earnings and claimant count changes hit the headlines this week. The doll queue fell by 14.5k, while December earnings hit two per cent. Normally, this would be a massive buying signal, however take it as a sign that employment is still strong and inflation may have bottomed out.

USD

The chatter just kept on coming from US Fed members, as a traditional hawk by the name of Fed president James Bullard stated it would be “unwise” to continue hiking rates amid falling inflation. Fed member Kashkari expressed concerns on low inflation but was still supportive of ‘gradual’ hikes. The market is still pricing in zero rate hike this year. Either way, price action was muted as the USD traded in a tight range vs the euro and sterling. Philly manufacturing data along with more comments from FOMC member Williams were the major risk events. Oil and sterling stood to help drive dollar direction.

Euro

Not much to report on the EUR, as the common currency sat in a fairly tight range awaiting direction. French CPI, Spanish 10-year bond auction and ECB’s monetary policy meeting notes all hit the screens this week.