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A Good Start to the New Year

  • January 03rd, 2017
  • Author: Simon Birch
A Good Start to the New Year

A series of manufacturing reports from across the globe have kicked off the New Year. The fresh data out of the UK showed a surprise expansion in the nation’s manufacturing activity in December. Moving ahead in the day, traders will keep an eye on two manufacturing surveys from the US i.e. the Markit manufacturing and ISM manufacturing PMI along with construction spending data for further cues.

Yesterday, data released in the Euro zone indicated that the region’s manufacturing sector growth recorded its strongest reading since April 2011, on the back of quicker growth in orders and production. Additionally, the final Markit manufacturing PMI expanded more than previous estimate in December, hitting its highest level in 35 months. Moreover, French manufacturing production advanced at its quickest pace since May 2011.

Pound Sterling – UK Markets

The Pound is trading higher against the US Dollar and the shared currency this morning, beginning the New Year on a positive note. The just out economic data indicated that UK’s manufacturing output surprisingly expanded to a two-year high in December, due to rising domestic and overseas demand. The UK economic calendar remains devoid of any other economic releases ahead in the day. Looking forward in the week, investors’ will closely watch Britain’s construction and services PMIs along with the net consumer credit data.

Separately, leading Brexit supporter, Michael Gove announced that UK has a bright future ahead provided it decides to leave the European Union’s (EU) customs union. Additionally, a pro-Brexit group, Change Britain suggested that Britain could add about 400,000 jobs if it takes a decision to exit EU’s customs union in the Brexit deal discussions. Meanwhile, investors will look forward to UK Supreme Court’s ruling expected to be out in mid-January on whether Prime Minister Theresa May has the right to trigger Article 50 or will require a Parliamentary approval to start the official process.

US Dollar – US Markets

The US Dollar traded higher against its major peers on the first trading day of the New Year. Data released on Friday indicated that the manufacturing activity in Chicago dropped more than estimated in December, from a previous reading that had registered its highest level since January 2015 and denting optimism over the US economic outlook. However, a reading well above the 50 mark suggests that manufacturing activity remained resilient at the end of 2016.

The US Dollar is trading higher against the shared currency this morning. Today, the ISM and Markit manufacturing PMI’s along with construction spending data will be on investors’ radar. Market participants expect the nation’s manufacturing activity to expand in December, while construction spending is anticipated to grow in-line with market estimates for November. Later in the week, traders will focus on US jobs data to gauge strength in the nation’s labour market along the FOMC minutes of its December monetary policy meeting for further direction.

Euro – European Markets

The common currency is trading lower against the greenback and the Pound in the second trading day of 2017, as the Euro remains vulnerable to unprecedented political uncertainty and worsening demographics in 2017. Recent data showed that the unemployment rate in Germany remained unchanged in December compared to a reading in the preceding month. Meanwhile, the number of people unemployed in Germany dropped more than expected in December. Market participants would closely monitor German consumer prices data, scheduled in a few hours to get better insights into the nation’s economy. Meanwhile, analysts are of the view that the flash German consumer price inflation would advance in December, suggesting strength in the Euro zone’s largest economy.

Moving ahead into the first trading week of 2017, traders’ will focus on the Euro zone’s CPI, Markit manufacturing and services PMI’s along with ECB’s monetary policy meeting accounts.

Other Currencies – Highlights

The Australian Dollar has reversed its previous session losses and is trading higher against the greenback this morning, after data released overnight showed that Australia’s manufacturing sector expanded for the third successive month in December, as factory output continued to regain momentum after surrendering to volatility in the third quarter. Moreover, the nation’s RBA commodity index in SDR terms registered a rise in December. Meanwhile in China, Australia’s largest trading partner, the Caixin manufacturing purchasing managers' index (PMI) climbed more than expected in December. The index marked the fastest rate of improvement in Chinese manufacturing conditions since January 2013.

During the previous session, the Australian Dollar ended lower against its US counterpart, as the latter witnessed a bullish charge across the board. On Friday, Australian private sector credit rose as expected in November. However, other personal credit which includes credit cards and car loans remains the chief area of weakness in private sector credit.

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