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Ambassador, with this leaving speech you are really less than diplomatic

Ambassador, with this leaving speech you are really less than diplomatic

Yesterday’s resignation of Sir Ivan Rogers, the UK ambassador to the EU, reinforced uncertainties surrounding Brexit. In his valedictory letter to staff he hinted that the government was guilty of muddled thinking, that the negotiating experience required for Brexit was in short supply, and that ministers needed to hear “the truth”. Following this, the Pound dropped against the Dollar to two month lows, around 1.2200.

On a more positive note, the UK PMI manufacturing index was stronger than anticipated with an increase to 56.1 for December from the previous 53.6. Shop prices fell 1.4% in the year to December from a 1.7% drop previously. There were gains for orders and output with strong growth in exports. There was also strength in the investment sector which will boost confidence in the structural outlook.

Yesterday, the Dollar resumed its upward trend against its peers after strong US manufacturing PMI figures showed the pace of expansion at a two year high, reflecting firmer output and the biggest pickup in order growth since August 2009. The bullish news pushed the Greenback higher against the Euro – nearly 1% higher on the day.

Later today the Dollar will take centre stage as the Fed will publish its minutes from the December interest rate meeting. Market consensus expects the minutes to reveal a hawkish message, with the discussion around the three projected interest rate hikes for the current year poised to grab all the attention.

German unemployment data remained strong with a further decline of 17,000 in the jobless total for December. According to provisional data, German consumer prices increased 0.7% in December compared with an expected 0.6% gain. Also, the annual inflation rate rose sharply to 1.7% from 0.8%, the strongest rate for over three years. Today’s Eurozone CPI data release will be important as a strong increase in the annual rate would further speculation that the European Central Bank (ECB) will curb monetary expansion this year.

Data to watch: 9am UK Markit Services & Composite PMI. 9.30am UK Construction PMI, Consumer Credit & Mortgage Approvals. 10am EUR Preliminary Dec Consumer Price Index & Core CPI.1.15pm US ADP Employment Change. 7pm US FOMC Minutes.

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