European session review: GBP falls after UK PM 's speech about future trade relationship with EU

GBP fell against other major currencies in the European session on Monday after the UK's PM Boris Johnson in his speech about future trade relationship with the EU laid out tough terms for post-Brexit talks with the block. He stated that there is no need for the trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar. He also added the UK wants a free trade agreement, similar to Canada's. However, the EU's chief Brexit negotiator Michel Barnier, who spoke shortly before the UK's PM, stressed that both sides must agree on a level playing field and the EU does not want the UK's divergence from the block's rules to result in unfair competition.

Meanwhile, the market participants ignored the release of UK final manufacturing PMI for January, which showed the activity in the UK's manufacturing improved more than initially estimated. The IHS Markit/CIPS reported the UK Purchasing Managers' Index (PMI) rose to a nine-month high of 50.0 in January, compared to a preliminary estimate of 49.8 and December's reading of 47.5 (a reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction). That was the highest reading since last April and pointed to the stabilization in the sector following eight straight months of contraction. According to the report, new orders and business confidence demonstrated mild recoveries, and production volumes stabilized as the levels of political uncertainty reduced following the general election. In addition, the level of employment was broadly unchanged during January, halting a nine-month sequence of job losses.

EUR traded mixed against its major rivals (it rose against GBP, but fell against most of the rest), despite the fact the latest data from IHS Markit revealed the Eurozone final manufacturing PMI for January was revised higher to 47.9 in January from a preliminary estimate of 47.8. That represented an improvement from December's reading of 46.3 and pointed to the slowest contraction in factory activity in nine months. According to the report, falls in output, new orders and purchasing slowed, while the pace of job losses remained marked.

Elsewhere, the safe-haven JPY and CHF traded little changed against their major rivals amid lingering fears about the spreading of coronavirus in China, while CNH remained under pressure.