Sterling climbs in relative calm
UK construction PMI data dropped slightly lower than forecast at 52.8 for December, a three-month low, but business confidence increased to eight-month highs with optimism over infrastructure projects. Markets remained wary of the overall economic outlook and political uncertainty but Sterling gained some support from improved global risk conditions and risk assets recovered some stability.
Angela Merkel and Irish PM Leo Varadkar reiterated that the Brexit withdrawal deal was already being ratified and would not be changed but pledged to offer reassurances and guarantees where possible. The Euro was unable to hold Wednesday’s gains, drifting to the 1.1085 area and the Pound moved back above 1.2600 against the Dollar. November’s mortgage approvals and December’s Services PMI are the only Tier one UK data today.
The US ADP data recorded a much stronger-than-expected increase in December private payrolls of 271,000 compared with consensus forecasts of 180,000, although there was a downward revision to 157,000 for November.
Dallas Federal Reserve (Fed) President Kaplan stated that the Fed must be vigilant and should be ready to adjust the balance sheet if necessary. He also commented that financial conditions have tightened and that he favoured no rate increases in the first half of the year given that the US was unlikely to be immune to slower Chinese growth.
Sentiment shifted sharply after the ISM manufacturing index declined to 54.1 for December from 59.3 previously. The release was well below consensus forecasts of 57.7 and the lowest reading for over two years.
The new House of Representatives passed a funding bill to end the shutdown, but it was expected to be vetoed by President Trump and the Euro held just below 1.1400 ahead of the US employment data and comments by Fed Chair Powell later today.
The Euro recovered some ground yesterday with an unwinding of cross-related moves from the flash crash having an important impact. Progress was hampered by a sharp rise in Italian bond yields with rumours of fresh difficulties in the banking sector. The Euro took advantage of Dollar weakness and consolidated near 1.1400.
Preliminary inflation figures for December are due out today and are forecast to reveal a slowdown in the headline Consumer Price Index from 2% to 1.8% due to falling oil prices. Core CPI is expected to remain unchanged at 1%.
Data to watch:
01:45 CNY Caixin Services PMI (Dec)
08:15 EUR Markit Services PMI (Dec) (Spain)
08:55 EUR Unemployment Change (Dec) (Germany)
08:55 EUR Unemployment Rate s.a. (Dec) (Germany)
09:00 EUR Markit PMI Composite (Dec)
09:00 EUR Markit PMI Services PMI (Dec)
09:30 GBP Mortgage Approvals (Nov)
09:30 GBP Markit Services PMI (Dec)
10:00 EUR Consumer Price Index (YoY) (Dec)
10:00 EUR Consumer Price Index – Core (YoY) (Dec)
10:00 EUR Producer Price Index (MoM) (Dec)
10:00 EUR Producer Price Index (YoY) (Dec)
13:30 USD Nonfarm Payrolls (Dec)
13:30 USD Average Weekly Hours (Dec)
13:30 USD Average Hourly Earnings (YoY) (Dec)
13:30 USD Labor Force Participation Rate (Dec)
13:30 USD Average Hourly Earnings (MoM) (Dec)
13:30 USD Unemployment Rate (Dec)
13:30 CAD Net Change in Employment (Dec)
13:30 CAD Participation rate (Dec)
13:30 CAD Unemployment Rate (Dec)
14:45 USD Markit Services PMI (Dec)
14:45 USD Markit PMI Composite (Dec)
15:15 USD FOMC Member Bostic speech
15:15 USD Fed’s Powell Speech
18:00 USD Baker Hughes US Oil Rig Count
18:30 USD Fed’ds Bullard speech