What’s been happening?

Pound Sterling – UK Markets 

The British pound finished the week on a weak note and recorded modest losses against both the dollar and the euro as investors moved to the sidelines ahead of Tuesday’s critical Brexit vote in the Parliament. The Bank of England on Friday said that median expectations for inflation in the next 12 months rose to its highest level in five years at 3.2% from 3% announced in August’s survey. Further details of the publication revealed that the expectations for inflation in the 24 months ticked down to 2.8%. Additionally, the BoE noted that 53% of respondents expected a rate hike in a year’s time vs 58% in August. Meanwhile, the Halifax House Price Index released by the HBOS showed a 1.4% decline in house prices in November following October’s 0.7% increase.

Later in the day, British Prime Minister Theresa May’s spokesman told reporters that the government was willing to consider amendments on the backstop and added that PM May had no intention of extending Article 50. While responding to a question, the spokesman reaffirmed that the vote in the Parliament would go ahead as planned on December 11. 

US Dollar – US Markets

The US Dollar Index, which measures the dollar’s value against a basket of six major currencies, fell for the third straight day on Friday as the buck came under pressure following the disappointing labour market data. According to the U.S. Bureau of Labor Statistics, total nonfarm payroll employment increased by 155,000 in November to miss the experts’ estimate of 200,000 by a wide margin. Furthermore, October’s reading got revised down to 237,000 from 250,000. Other components of the report revealed that the unemployment rate stayed unchanged at 3.7% as expected and the wage inflation, as gauged by the average hourly earnings, came in at 3.1% on a yearly basis to meet analysts’ forecasts.

Meanwhile, the University of Michigan’s Consumer Sentiment Index came in at 97.5 in the first estimate of December to match November’s figure. “As noted in last month's report, as long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending. In the early December survey, however, consumers did mention hearing much more negative news about future job prospects,” Surveys of Consumers chief economist, Richard Curtin, noted in the report.  

Earlier in the day, John Williams, President of the New York Fed, said that the U.S. economy was pretty strong and reiterated that policymakers needed to be flexible in order to respond to unexpected economic changes. “Managing a soft landing is a key Fed policy challenge,” Williams argued. 

Euro – European Markets

The euro advanced to its highest level since late September against the British pound while recording moderate gains against the buck. Friday’s data from the euro area showed that the real GDP expanded 0.2% on a quarterly basis in the third quarter and dragged the annual growth rate down to 1.6% from 1.7% in the second quarter. On the other hand, annual employment change stayed unchanged at 1.3% in the same period to come in line with the market expectation.

Earlier in the day, Italy's Deputy Prime Minister Luigi Di Maio told Radio 4 that there was no need to cut reforms in the budget and reiterated that he had full confidence in Economy Minister Giovanni Tria and believed that Italy would avoid the EU’s disciplinary procedure. Responding to reports claiming that Tria was on the verge of quitting, the minister said that he had no intention of resigning. 

What’s coming up? 

UK: The UK’s Office for National Statistics on Monday will release the industrial/manufacturing production, trade balance, and October’s monthly GDP growth data.

US: The only macroeconomic data release from the U.S. on Monday will be JOLTS Job Openings.

EU: The European economic docket will feature trade balance and current account data from Germany and Sentix Investor Confidence from the euro area.