The global economic calendar is relatively light for the final week of 2016 amid thin trading volumes ahead of the New Year holidays. The UK docket consists of only two important releases this week, namely the British Bankers’ Association (BBA) mortgage approvals for November and Nationwide housing prices for this month. Among the major data reported in the Eurozone today, Italy’s consumer and business confidence, the first official sentiment update since the constitutional referendum, surprisingly advanced in December, thus brightening the mood in both the sectors at the year-end.
Across the Atlantic, US pending home sales figures for November due to publish later in the day will provide further insights about the nation’s residential market.
Pound Sterling – UK Markets
Heading into last trading week of 2016, Sterling has weakened against the US Dollar, with the currency pair trading consistently above the 1.2240 mark this morning. The currency pair has failed to gather momentum into this week as activity in the currency markets remains limited on thin trading volume session. On the data front, UK’s BBA mortgage approvals registered an unexpected decline in November.
This week’s British economic release before the year-end appears to be very quiet with the only exception of December’s Nationwide house prices data, scheduled to be released tomorrow. The economic data could have a minor impact on trading in the British Pound against the greenback, given its importance to gauge the inflationary pressures in the nation. Expectations are for the seasonally adjusted Nationwide house prices to have advanced in December.
US Dollar – US Markets
Yesterday, the US Dollar traded mostly higher against its major peers, after the Conference Board indicated that its consumer confidence index jumped to its highest level since 2001 in December, encouraged by robust labour market and rising house prices in the US and spurring hopes that the economy will carry this momentum into 2017. Moreover, a survey by the Dallas Fed revealed that manufacturing activity in the region expanded in December, notching its highest level since 2014.
The greenback is trading on a firmer footing against the Pound and the Euro this morning, as traders remain on the sidelines in the absence of significant macro updates. Later in the day, pending home sales and MBA mortgage applications data are up for release which could provide further direction to the US Dollar. Market participants expect the pace of pending home sales to have increased in November, given favourable fundamentals such as improving labour market, wage growth and low borrowing rates which could be helpful for continued recovery in the US housing sector.
Euro – European Markets
The Euro remains vulnerable to unprecedented political uncertainty and worsening demographics in 2017, particularly in the run up to France’s Presidential elections. On the contrary, the just released data showed that the business confidence index in Italy improved in December. Meanwhile, analysts are of the view that the Italy economy would not expand more than 1% this year, considering it as one of the most sluggish economies in the Euro-bloc.
With no major economic data in the Euro zone today, market participants would closely monitor Italy’s consumer prices data, scheduled tomorrow to get better insights in the nation’s battered economy. Last week, in a notable event, the Italian government finally pulled the trigger on an inevitable bailout after Monte Dei Paschi di Siena (MPS), the country’s third-largest lender, failed to secure its future by raising capital from investors. Additionally, the Italian Prime Minister, Paolo Gentiloni, mentioned that EU officials agreed with Italy’s plan to provide support to the country’s ailing banking system.
Other Currencies – Highlights
The Japanese Yen is trading lower against the US Dollar this morning. Overnight data indicated that Japan’s flash seasonally adjusted industrial production jumped on a monthly basis in November, registering its highest level in 5 months, suggesting that activity in the world’s third-largest economy continues to pick up pace, thereby raising hopes of brighter fourth quarter. Adding to the optimism, the nation’s retail trade rebounded more than expected on an annual basis in November. Separately, Japan’s housing starts rose at the weakest pace in 3-months in November. Earlier in the week, data indicated that Japan’s jobless rate unexpectedly rose in November, adding worries to an already clouded economic outlook. However, the availability of jobs improved in November.
Going ahead, traders’ would focus on the Bank of Japan’s (BoJ) summary of opinions, scheduled to be released later in the day.