UK Industrial Production Sharply Falls in November
The ongoing uncertainty in the global markets and weakness in oil prices continue to drive broader market sentiment today, amid lack of significant macroeconomic indicators in the major economies. As such, the UK industrial as well as manufacturing data that came out just now is likely to have taken the center-stage. Data showed that Britain’s industrial and manufacturing production slumped in November, suggesting that the economy slowed towards the end of 2015.
Across the Atlantic, a pair of economic data releases such as the NFIB small business optimism indicator and the JOLTS job openings report are lined up for release later in the day. However, it is a light economic calendar day in Europe.
Pound Sterling – UK Markets
This morning, the Pound was pushed lower towards the 1.45 mark against the US Dollar. Sterling has been under pressure against most of the majors in the New Year due to the risks stemming up from the potential UK referendum of its stay in the European Union. Also, a recent sharp slide in oil prices and concerns of weaker demand from China has the Pound traders worried. Meanwhile, investors who were looking for some overdue good news from the UK domestic economy were also left disappointed after the just out data suggested that there has been hardly any improvement to the dire conditions faced by the UK industrial sector in the end of 2015. Economic data showed that industrial production dropped the most in nearly three years in November, as unusually warmer weather diminished energy demand. Additionally, manufacturing output unexpectedly fell in November.
Going forward, the Bank of England is scheduled to announce its rate decision later this week. Given the weakness in wage growth and also a decline noticed in the industrial sector, it is unlikely the bank will shift its policy stance any time soon.
US Dollar – US Markets
The greenback is trading mixed against its major currency counterparts this morning, amid the ongoing uncertainty in the global markets and the oil prices slump. On the macroeconomic front, the US calendar looks light even today, with only NFIB’s small business optimism index and JOLTS job openings data of note. According to the recent survey numbers, optimism surrounding small businesses has been under pressure lately. However, today’s data is estimated to deliver a slight rebound for December, pointing towards a slightly better outlook for the small company realm in the New Year. In addition, market participants will eye the monthly update on new job vacancies in hope of another upbeat profile of the US labour market. Other than economic news, several Fed officials are due to speak this week. Markets will monitor their speeches for further insights about the pace of subsequent interest rate rises.
This week amongst the scheduled US economic releases, all eyes will be on the retail sales report for December. A better than expected retail sales print could support the US Dollar and bolster market sentiment.
Euro – European Markets
Currently, the Euro – US Dollar currency pair appears to have given up the race towards the 1.09 mark. In the absence of significant macro updates in the Euro bloc, a number of factors including a mixed greenback and continued decline in oil prices had buoyed recovery in the shared currency earlier in the day. It is very much likely that broader market sentiment and oil price movement will continue to influence further direction in trading in the Euro against the US Dollar today.
In the coming days too, there will be little in terms of crucial macro data in Europe. Tomorrow, Euro zone’s industrial production data will mark the headlines in the European economic calendar, with markets anticipating that output growth declined in November. Also, of particular interest would be the European Central Bank’s (ECB) account of the monetary policy meeting on this Thursday. The December meeting had left many disappointed by a small bundle of easing measures, instead of a large package of additional stimulus. The ECB minutes this week might provide additional context into the controversial decision.
Other Currencies – Highlights
The Canadian Dollar has extended its weakness against the greenback for the seventh consecutive day, amid the persistent rot in oil prices. The extension of losses in the Loonie has been pretty much driven by persistent concerns surrounding a slowdown in China’s economic growth which had led to further decline in oil prices and has impacted the domestic economy as well as markets across the globe.
Moreover, a closely tracked Bank of Canada’s quarterly survey of businesses in the nation published yesterday showed that hiring and spending plans were the weakest since 2009 as domestic firms and those involved with the resources sector adjusted their investment plans in tandem with the prevalent weak economic activity. The survey adds to evidence that the Canadian economy is not coping well and that the economy could slip back into recession. The deteriorating environment could even compel Canada’s central bank to slash its interest rates again at its next rate-setting meeting due in the next week.