European session review: USD keeps firm against major rivals

USD kept firm against major rivals on Monday as last week’s run of macroeconomic data confirmed the health stance of the U.S. economy. 

Meanwhile, GBP fell against its major counterparts amid growing expectations of a 25bps rate cut by the Bank of England (BoE) at its upcoming monetary policy meeting on 30 January. Additional pressure on the pound had the statements of the UK's Chancellor Sajid Javid. In an interview with the Financial Times, he stated that there would not be alignment with EU regulations in the future and urged businesses to adjust with changes. "There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union - and we will do this by the end of the year," Javid said, adding: "It will mean businesses will have to adjust to costly new checks, processes and procedures, that will act as a barrier to frictionless trade with the EU and may well result in price rises."

Elsewhere, the release of German producer prices for December had little impact on EUR. The Federal Statistical Office (Destatis) reported the producer price index (PPI) decreased by 0.2% y/y in December 2019, following a 0.7% y/y decline in November. In m/m terms, the PPI edged up 0.1 percent. Economists had expected the indicator to increase 0.2% m/m and to fall 0.2% y/y. Over 2019, the PPI rose by 1.1% on an annual average from the preceding year.

Investors await the monetary policy decisions from the policymakers of two central banks later this week - the Bank of Japan (BoJ)  on Tuesday and the European Central Bank (ECB) on Thursday.

The BoJ is unlikely to change its monetary policy at its January 20-21 meeting, but it may slightly improve the economic outlook for the current fiscal year, taking into account the stimulus measures announced at the end of last year.

The ECB is not expected to make any changes to its policy stance this week, but the market participants wait for information about the strategic review of the ECB's monetary policy, which was previously mentioned by its President Christine Lagarde.