Firm Risk Appetite Steadies Sterling
As forecast, UK construction-sector PMI declined slightly to 54.6 for December from November’s 54.7, but new orders continued to increase, there was further strong growth in the house-building sector and employment increased slightly. The Pound benefited from the protection of firm global risk appetite, especially with and further gains in the FTSE 100. UK equities underwhelmed substantially last year and now with a Brexit trade deal in place there is pressure for funds to increase their UK weightings
Although daily coronavirus cases were down, daily deaths increased and there were further concerns over the near-term economic outlook with increased speculation that negative interest rates could arrive as early as February. Sterling settled below 1.3600 on the Dollar but was supported below 1.3550 and the Euro settled around 1.1060. Sterling is little changed at market open, still holding above 1.3550 against the Dollar.
US initial jobless claims declined to 787,000 in the latest week from a revised 790,000 the previous week and slightly below consensus forecasts of 800,000. Continuing claims declined to 5.07mn from 5.20mn the previous week and also slightly below market expectations.
The ISM non-manufacturing index strengthened to 57.2 for December from 55.9 previously and confounded expectations of a monthly decline. There was also a slightly faster pace of new orders on the month, but employment declined and order backlogs also declined. Given coronavirus restrictions, the headline data provided significant relief, although companies were cautious over the outlook.
The Euro-zone services sentiment index weakened to -17.4 from -17.1 the previous month, although there was an improvement in industrial confidence to -7.2 from -10.1 previously. Earlier, Germany reported an increase in factory orders of 2.3% for November from 3.3% the previous month. Euro-zone consumer prices declined 0.3% in the year to December, unchanged from the previous month and slightly below market expectations of 0.2% while the core rate remained at 0.2%.
The Euro moved lower in early trading on Thursday as the Dollar secured a technical comeback after recent selling pressure. The single currency was hampered to some extent by concerns over a slow pace of coronavirus vaccine rollouts in the Euro-zone area. Furthermore, Germany also reported its highest daily coronavirus death toll. The latest employment report is scheduled for release today with markets braced for a weaker report, although the impact is liable to be limited.
As of writing, the Euro currently trades around the 1.2235 mark against its US counterpart.
Data to watch
14:30 – USD – Average Hourly Earnings
14:30 – USD – Non-Farm Employment Change
14:30 – USD – Unemployment Rate