New Year’s resolution: stop gambling and start preparing
The Pound dropped just before the Christmas break as investors sold Sterling. Against the Euro, the Pound hit lows of 1.1630 but the Euro struggled to maintain its strength for long. There was a similar story versus the Dollar, falling as low as 1.2208 and peaking at 1.2379.
There are still concerns that Brexit uncertainty will undermine the UK economy during the first few months of 2017 with the risk that investment could be scaled back. The Supreme Court ruling on parliamentary involvement in invoking Article 50 is expected in early January. The PMI data out this week will be watched closely, with the manufacturing data due for release on Tuesday which will highlight export data and inflationary pressures on the UK currency.
In the US last week there was a larger than expected goods trade deficit for November and the extremely volatile Chicago PMI index declined to 54.6 from 57.6. The US consumer confidence was stronger than expected with 113.7 for December, up from 109.4 and the highest reading since 2001. There was a decline in the current conditions index as expectations of stronger growth continued to dominate.
The job market was one of the brightest spots of the U.S. economy over the past year, with solid monthly job gains of an average 161,500 jobs per month throughout November 2016, and December’s increase will likely be in line with the 176,000 job gain averaged over the past three months.
The Euro was looking to end 2016 on a positive note against the US Dollar, breaking above 1.0650, but it failed to sustain the move and slumped to the 1.0500 area. Today’s German consumer price index preliminary reading is expected to show an annualised rise of 1.5% in Dec 2016. The monthly figure forecasted to increase by 0.6%.
Data to watch: 8.55am EUR German Unemployment Rate & Change. 9.30am UK Markit Manufacturing PMI (Dec) 1pm German Flash Consumer Price Index YoY & MoM, Harmonised CPI YoY & MoM. 2.45pm US Markit Manufacturing PMI Dec. 3pm US ISM Prices Paid, ISM Manufacturing PMI.