Further Brexit Bill debates
UK December construction purchasing manager index declined from 45.3 to 44.4, below forecast and the eighth reading below the 50.0 level. Activity declined across the board with commercial activities showing a very sharp decline. As political uncertainty was cited as a key negative factor, developments in early 2020 will be monitored closely. The Pound dropped in the aftermath and weaker global risk conditions also chipped away at sentiment.
Sterling dipped close to 1.3050 against the Dollar by early afternoon before a tentative recovery.
The House of Commons returns from recess on Tuesday and political developments will return to scrutiny. The Brexit Bill will be debated with the implementation period of particular importance. At market open the Pound had edged below 1.3100 against the Dollar and 1.1720 against the Euro amid fragile global risk trends.
The US ISM non-manufacturing business confidence declined to 47.2 for December from 38.1 previously. This was below market expectations of 49.0 and the weakest reading since June 2009. Production declined at a faster pace while new orders and order backlogs also continued to decline on the month. Employment declined at a faster pace, but prices increased on the month. The dollar lost traction following the ISM data with the Euro recovering to above 1.1150.
Richmond Federal Reserve (Fed) President Barkin stated that it would take a substantial move in the economy to merit a change in interest rates. New York Fed President Williams stated that low-interest rates are here to stay, but he opposed changes to the inflation target. Minutes from December’s Federal Reserve minutes reiterated that rates were likely to remain on hold in the short term There were, however, warnings from some members that keeping rates low for a long time could exacerbate financial-sector imbalances.
Middle Eastern tensions continue to dominate as we start the European open with the Euro weakening to lows at 1.1125 against the US dollar despite support from the robust current account surplus. Narrow ranges are currently prevailing with the common currency holding steady at 1.1160.
Last week, German unemployment data increased 8,000 for December, above consensus forecasts of a 2,000 increase for the month. German consumer prices increased 0.5% for December with the year-on-year rate at 1.5% from 1.1% previously and above consensus forecasts of 1.4%.