Plan B in focus
UK retail sales volumes declined a shade more than forecast with -0.9% for December and year-on-year growth was pared back to 3.0% from 3.4% previously. Confidence in the growth outlook remained weak as political uncertainty persisted, especially against the backdrop of concern surrounding the housing sector.
The Pound registered the largest weekly advance against the Euro for over 12 months, but there was a notable correction to below 1.1365 on Friday, and to below 1.2900 on the Dollar following profit taking. Over the weekend the political uncertainty persisted as markets await a Plan B announcement and further House of Commons amendments to the proposed bill. Reports emerged that the government might look to tinker with the Good Friday agreement in order to amend the backstop, but there was little confidence in success given EU and Irish opposition to the contentious plans.
New York Federal Reserve (Fed) President Williams stated that the US economy has come under pressure and that interest rates are closer to normal. He also remarked that the Fed would need patience, prudence and good judgement, especially as uncertainty in the economy has increased dramatically. The policy of reducing the balance sheet would be reassessed if conditions change.
There was a stronger-than-expected reading for industrial production. In contrast, the latest University of Michigan consumer confidence index fell to 90.7 from 96.3 previously and the lowest reading since October 2016 as expectations declined sharply on the month.
The Dollar held a firm tone over the weekend with a slight shift in net sentiment and expectations that the US would still out-perform the Eurozone. The US currency secured net gains for the week and advanced to the strongest level since early January as existing yield spreads provided support.
Friday continued to see decreasing confidence in the Eurozone overgrowth forecasts. This is having a direct effect on the single currency, with the Euro struggling to break the 1.1400 mark versus the Dollar. Continued uncertainty in the equity markets is also proving to be a barrier for the currency.
Monday is a holiday in the US, so subdued trading conditions are expected to create less volatility in the Euro. Data today only really includes German producer price index figures, otherwise, there is virtually nothing else to take note of.
Data to watch:
00:30 AUD HIA New Home Sales (MoM) (Dec)
02:00 CNY Gross Domestic Product (QoQ) (Q4)
02:00 CNY Gross Domestic Product (YoY) (Q4)
02:00 CNY NSB Press Conference
02:00 CNY Industrial Production (YoY) (Dec)
02:00 CNY Retail Sales (YoY) (Dec)
07:00 EUR Producer Price Index (MoM) (Dec) (Germany)