GBP
UK construction companies ended 2015 with a robust and accelerated expansion of overall business activity, thereby indicating a rebound from the slowdown recorded in November. 57.8 In December, up from a seven-month low of 55.3 in November. Higher levels of construction output have been recorded by the survey since May 2013, but the overall rate of expansion remained slightly weaker than seen on average over this period.
Growth across the UK’s service sector dipped last month, suggesting the British economy isn’t growing as fast as hoped. Markit’s UK Services PMI dropped to 55.5 in December, down from 55.9 in November. This still shows robust expansion with firms taking on more business but the Markit report said growth in recent months has been slower than in the first half of 2015.
Nearly GBP 50 billion was wiped off British blue chips on Thursday after China allowed its currency to weaken, rocking global markets and sending commodity shares to their lowest levels in more than a decade. UK mining and energy shares tumbled to their lowest level in more than 11 years, as industrial metal and crude oil prices slumped on concerns that major consumer China's economy is even weaker than anticipated. The commodity-heavy FTSE 100 hit a three-week low, dropping 2.7 percent, wiping 46.6 billion pounds off the index's market capitalisation.
Friday saw UK trade balance figures released in line with forecast at -10.6B we did not see much movement in favour of the Pound. On Thursday this week the FOMC are due to meet with no indication to raise rates but will be interesting to see if there is any indication to what the members thoughts are regarding current global macro-economic conditions. As low Oil prices and China’s stock market volatility filter through the global economy. We could see all 9 members voting for a non-move on interest rates especially as we wait to see how the Brexit scenario pans out.
EUR
German joblessness fell more than economists anticipated in December in a sign that economic momentum will continue to be underpinned by household spending. The number of people out of work declined by 14,000 to 2.757 million. Economists in a survey predicted a drop of 8,000. The unemployment rate remained unchanged at 6.3 percent, the lowest level since German reunification.
The number of Spaniards registered as unemployed fell by 55,790 in December, decreasing for a second month as businesses hired staff for the Christmas period. The decline was higher than the 50,000 drop forecasted by economists. On a seasonally adjusted basis, the number of unemployed fell by 1,258. Overall, joblessness declined by 354,203 on an annual basis.
Growth in Europe is picking up. The composite PMI, which measures manufacturing and service growth across the Eurozone, hit a 4 and a half year high, up to 54.3 from 54.2. Ireland posted the fastest growth, continuing a strong run. More surprisingly, Italy was the second-best performer, ahead of Germany, whilst France continues to slide.
Last week saw some strong figures for the Eurozone which kept EUR/USD at current levels despite downward pressures from a strong USD. Friday saw Eurozone data releases come out poor but these data releases were all of low significance data. This week is a quiet one for EUR data again with not too much in the way of significant data releases; this subsequently puts EUR at the mercy of other market pressures such at USD, Super Thursday and the current Oil crisis.
USD
U.S. companies added a significant number of workers December, pointing to underlying strength in the economy despite signs that growth slowed sharply in the fourth quarter. ADP said private-sector employment rose by 257,000 last month, the largest gain since December 2014, after increasing by 211,000 in November.
According to Markit US services grew more strongly than expected in December, but were still at their lowest level since January last year. Its services PMI came in at 54.3 compared to expectations of 54 and an initial reading of 53.7. However, it was weaker than the November figure of 56.1. The data suggests that the US Service sector ended the year on a weaker footing, with business activity and incoming new work both expanding at lower rates than November.
The ISM non-manufacturing report also suggests some weakness in the US economy. PMI came in at 55.3 in December, down from 55.9 in November and lower than the 56 that analysts had been expecting. This was the lowest reading since April 2014.
On Friday we saw a very strong Non-Farm Payroll figure coming in at 292k against a previous figure of 252k. Naturally we saw the USD continue to rally with GBP/USD continuing its downward trend hitting new 52 week lows.
With the FED meeting towards the end of this month, all eyes will scrutinize any indication as to when the next rate hike is scheduled. Depending on how the FED members discuss the US economic situation and their stance on another rate hike; there is definitely scope for GBP to claw back some ground against the USD and other counter parts.
On Monday the US we had the Labour Market Conditions Index (Dec), which came out at 2.9 which is higher than the previous 2.7. A reading above 0.0 indicates improving labour market activity, below indicates deteriorating activity. So this is positive data for the US, however it is not a huge market mover.
The S&P 500 fell again on Monday continuing its bumpy start to the year with the S&P 500 and the Dow posting their worst five-day start to the year in history. However the dollar did make a recovery towards the end of the day and regained most losses. Crude prices fell 4.3 percent to $31.72 a barrel, while benchmark Brent dropped 5 percent to $31.83 a barrel, which was a 12 year low.
