UK seeks border order
The Services sector PMI declined to 53.8 for November but did show an increase in order backlogs and business optimism strengthened slightly. Input prices rose at the fastest pace since the beginning of 2011 while output prices increased at the fastest pace since February 2008. This will only increase inflationary pressures and concerns going forward. BRC Like-For-Like Retail Sales only produced 0.6%, showing that Black Friday hasn’t boosted retailers coffers by much.
There was little overall reaction to the data with market attention focussed firmly on political developments. Diplomatic activity was intense with the UK government seeking to resolve differences and find an Irish border solution which was acceptable to the Democratic Unionist Party (DUP). The timetable remains very tight with Brussels negotiators needing agreement this week and expecting fresh UK proposals on Wednesday.
Sterling came under pressure early the European session, but gradually regained support on hopes for an eventual deal. The Pound moved to 1.3450 against the Dollar from lows below 1.3380 with the Euro retreating back below 1.1365. Support faded again in Asia in the early hours of today with a more defensive tone surrounding risk appetite hampering Sterling.
US ISM non-manufacturing index showed a weak outing yesterday with a retreat to 57.4 for November, down from 60.1 the previous month. This was coupled with a decline in the services sector PMI index to a five-month low of 54.5 and sent a wave of dampened enthusiasm regarding the outlook for the Dollar.
Further, the US trade balance sheet reached a deficit of $48.7 billion for October, up from $44.9 billion and there are concerns that the tax reform has already been priced in. This hindered Dollar sentiment but a buffer from the currency’s peers prevented any major loses. Cable hovered around the 1.3430 mark whilst, against the Euro, a strong outing upon opening saw gains to 1.1802 before closing at 1.1823.
The Euro is edging higher this morning supported by the Eurozone PMI results that showed business activity accelerated in November as firms struggled to meet booming demand, with the PMI unchanged at 56.2.
The Eurozone retail sales fell 1.1% m/m in October, rising 0.4% y/y. While falling more than expected in October, positive economic fundamentals including falling unemployment and accelerating growth still signal a strong reading looking forward.
Today, German factory orders are expected to fall 0.3% m/m in October while rising 7.0% over the year. The Eurozone retail PMI is also expected to remain flat at 51.1 in November.
Data To Watch:
10:00 EUR Gross Domestic Product s.a. (QoQ)(YoY) (Q3)
13:30 USD Continuing Jobless Claims (Nov 24)
13:30 USD Initial Jobless Claims (Dec 1)
15:30 USD EIA Crude Oil Stocks change (Dec 1)
16:00 EUR ECB President Draghi’s Speech
19:00 USD Consumer Credit Change (Oct)