Reshuffle rumours stunt Sterling
Sentiment around the British Pound weakened following the weekend’s Brexit news, citing that the UK PM May will appoint a Cabinet Minister who will provide regular updates on preparations for leaving the EU ‘without a trade deal’. On Friday, the GBPUSD pair rebounded from an intraday low of 1.3523 and spiked around 50-pips.
Quite aside from negotiating with Brussels, Theresa May has had a tough time keeping her appallingly disunited party together. Accordingly, a reshuffle of the cabinet is expected as soon as today. The upper echelons of the cabinet – Philip Hammond, David Davis, Boris Johnson and Amber Rudd – are likely to remain in place. However, following Damian Green’s resignation, someone will have to be promoted to the role of de facto deputy Prime Minister. Health secretary Jeremy Hunt has been tipped for the job but following turmoil in the NHS this winter, many are likely to critique such a move.
The market now looks forward to the release of UK Halifax HPI data and Fedspeak for some fresh trading impetus.
On Friday, US nonfarm payrolls came out below consensus expectations at 148,000 as the November gain was revised up to 252,000. The ISM non-manufacturing index also showed a lower reading than the previous months with 55.9 for December down from 57.4. That said, a solid increase in manufacturing jobs will provide a slight respite to the weaker-than-expected data coupled with unemployment remaining at 4.1% and an increase in average earnings of 0.3%, meaning a 2.5% annual increase.
The Dollar dipped lower against its peers late Friday following the headline payrolls miss, yet recovered slightly to end the week in the mid 1.3500s against the Pound and slightly above the 1.2000 mark for the Euro. Expectations are the data overall will not dishearten the Fed and they will continue with their plan to tighten rates during the first quarter with chances of a March rate hike around 67%.
This week, the main headliner for the Dollar comes on Friday with Retail Sales and Consumer Price Index for December.
Consumer prices in the Eurozone declined to 1.4% in December from 1.5% in November, in line with consensus expectations. The December Core CPI rate fell to 0.9% from 1.0%, slightly weaker than consensus expectations. The Bundesbank’s President, Jens Weidmann, called for the European Central Bank (ECB) to clarify the end date of the bond-buying programme.
In Germany, coalition talks between CDU/CSU and SPD began on Sunday and will continue this week. If the exploratory talks find enough common ground, the SPD leaders will ask for a party convention on 21st January to back full-fledged negotiations. It’s worth bearing in mind that the election happened on 23rd September last year.
German manufacturing orders for November are due out this morning. Month-on-month, the figures are very volatile, but the underlying trend is robust and supports the picture of strong manufacturing activity.
Data To Watch:
n/a EUR Unemployment (Nov)
10:00 EUR Services Sentiment (Dec)
10:00 EUR Consumer Confidence (Dec)
10:00 EUR Industrial Confidence (Dec)
10:00 EUR Economic Sentiment Indicator (Dec)
10:00 EUR Business Climate (Dec)
18:35 USD FOMC Member Williams speech
20:00 USD Consumer Credit Change (Nov)
21:00 USD Federal Reserve Bank of Boston President Rosengren Speech