Currency UK: not on strike over Christmas
Pressure remained persistent for Sterling during Friday’s session dipping below the 1.2400 mark against the Dollar for the first time in December. The latest CBI Industrial data was stronger than expected with a rise to zero from a negative-three reading and production expectations remained strong. However, export data was less than inspiring despite the weaker Pound, continuing to reflect the uncertainty surrounding the Brexit process. Sterling has taken on a more defensive tone on fears that investments will be weaker over the next few months. Scottish First Minister, Nicola Sturgeon has stated that Scotland will hold another “UK referendum” if access to the single market post Brexit, cannot be assured.
Euro-zone Consumer Price Index (CPI) inflation data for November arrived in line with provisional forecasts, as the headline rate rose by 0.1% from 0.5% the previous month. The core rate was unchanged at 0.8%. The EURUSD reached highs of 1.0467 on Friday and held relatively stable for the day considering the previous two days ranging between 1.03 and 1.07.
Brexit will mean cuts for the rest of the European Union. Britain’s exit will mean a EUR 7.6Bn drop in contributions to Euro coffers; unless Single Market Access will be paid for. Danish Finance Minister Kristian Jensen said “No one, including Germany” wants to fill that gap. She continued to announce that the EU will not be able to sustain the same spending patterns as it once did, when “one of the largest contributors” leaves.
In the US, Richmond Fed President Lacker stated that three interest rate increases would be needed in 2017, maintaining his traditionally hawkish tone, while St Louis head Bullard commented that he has changed his opinion and that further rate increases would probably be needed next year. US housing data was weaker than expected with an 18.7% decline, a result of strong October data and there were concerns that higher bond yields would undermine confidence. There are some uncertainties about the size and impact of the fiscal stimulus on the US economy, this could lead to more US Dollar consolidation ahead of Christmas.
Data to watch: 9am German IFO Current Assessment, Business Climate, Expectations. 10am EUR Q3 Labour Costs. 14.45 US Flash Markit PMI Dec, Composite & Services.