Sterling unable to hold
The UK PMI construction index retreated from 53.1 to 52.2 for December, failing to live up to consensus forecasts of 52.5. That said, growth of new orders was at its fastest pace for seven months whilst the pace of employment growth was at its greatest since June. Sterling was unable to hold its recent bullish stance against the Dollar as levels tested the 1.3500 mark whilst retreating to mid 1.1200s against the Euro.
Strong oil prices did underpin the Pound but PMI services data out today will be watched for clues towards where this year’s Bank of England monetary policy will lead.
US ISM manufacturing beat expectations to rise to 59.7 in December, up from November’s 58.2. This was the strongest reading in three months and the second highest print in the past six years. New orders strengthened sharply to a 13-year high and price pressures also intensified. Although the employment growth eased slightly, there was still robust expansion. Construction spending rose 0.8% following a revised 0.9% gain the previous month. The Dollar gained ground following the data on growth optimism, although the Euro found support on approach to 1.2000.
According to minutes from December’s Federal Reserve (Fed) meeting, there was discussion about whether fiscal stimulus or easy financial conditions could boost output too much and require a steeper path of rate hikes. A few members stated that more rate increases could be needed in 2018, although a few others were concerned that Fed projections implied too many rate hikes. Policymakers, in general, considered the inflation outlook little changed and there was only a slight shift in Fed Funds futures given uncertainty and divisions within the committee. The Dollar advanced slightly on hawkish elements but was unable to gain significant traction with the Euro again holding above 1.2000 as Dollar gains remained unconvincing.
The German labour market data continued its strong run yesterday as unemployment levels fell by a further 29,000 for December following a 20,000 decline the previous month. The Euro continues to trade at high levels against the Dollar as highs of 1.2043 were last seen back in 2015.
For today’s agenda, final readings of Eurozone services PMIs including many of the individual members will provide insight into the economic situation of the services sector.
Data To Watch:
08:15 EUR Markit Services PMI (Dec)
08:55 EUR Markit Services PMI (Dec)
08:55 EUR Markit PMI Composite (Dec)
n/a EUR Unemployment (Nov)
09:00 EUR Markit Services PMI (Dec)
09:00 EUR Markit PMI Composite (Dec)
09:30 GBP Consumer Credit (Nov)
09:30 GBP Mortgage Approvals (Nov)
13:30 USD Continuing Jobless Claims (Dec 22)
13:30 USD Initial Jobless Claims (Dec 29)
14:45 USD Markit Services PMI (Dec)
14:45 USD Markit PMI Composite (Dec)