May to walk the plank
UK headline unemployment held at 4.1% but jobless claims printed a larger-than-expected increase at nearly 22,000 for November. Weekly average earnings produced an eight-year high of 3.3%, with average earnings excluding bonuses also at 3.3%, up from 3.2% in October. Positive earnings data maintains pressure for gradual interest rate hikes although, as always, political developments dominated.
The government stated that the Brexit vote would be held by January 21st and Theresa May raced over to Europe in an attempt to secure concessions from the EU. The EU uniformly confirmed there would be no renegotiation, but perhaps clarification on some points.
Sterling declined sharply late on following reports that there were enough letters to mount a leadership challenge on May. The underlying instability continued to undermine sentiment although there was no official confirmation of a vote until this morning. Sterling dipped to 20-month lows below 1.2500 while the Euro bounced from 1.1100 and touched fresh three-month highs above 1.1035 with UK weakness persisting today.
Renewed optimism over improving US-China trade relations initially weighed on the Greenback yesterday and assisted the pair to gain some positive traction. The up-move, however, faced rejection amid a fairly good increase in Dollar demand, supported by rebounding US Treasury bond yields.
US producer prices increased 0.1% for November compared with expectations of being unchanged and underlying prices increased 0.3%. The data had some impact in stabilising inflation expectations which underpinned the Dollar. The US NFIB small business optimism index fell to 104.8 in November compared with 107.3 expected and 107.4 last month.
The US core CPI is expected to accelerate to 2.2% year-on-year in November. The release is expected to be market-neutral as the focus is on Federal Reserve communication next week.
The Euro pushed to highs of 1.1400 against the Dollar before dropping off again as German yields reversed. German ZEW investor confidence index strengthened for December, demonstrating a slight improvement in the German outlook.
Brexit fears were again were affecting the Euro significantly, as well as other European currencies. French-German yields were widening due to the ongoing protests in Paris and the Euro struggled with investment funds maintaining long Dollar positions.
Today see’s a European Central Bank (ECB) meeting as well as a meeting between Juncker and Conte to discuss the Italian budget. However, the breaking news this morning of a vote of no confidence in Theresa May is massively increasing volatility across all European currencies.
Data to watch:
10:00 EUR Industrial Production s.a. (MoM) (Oct)
13:30 USD Consumer Price Index (MoM) (Nov)
13:30 USD Consumer Index Core s.a. (Nov)
13:30 USD Consumer Price Index n.s.a. (MoM) (Nov)
13:30 USD Consumer Price Index (YoY) (Nov)
13:30 USD Consumer Price Index Ex Food & Energy (YoY) (Nov)
13:30 USD Consumer Price Index Ex Food & Energy (MoM) (Nov)
15:00 EUR EU’s Juncker and Italy’s Conte meet to discuss Italian Budget
19:00 USD Monthy Budget Statement (Nov)
23:50 JPY Foreign investment in Japan stocks (Dec 7)
23:50 JPY Foreign bond investment (Dec 7)