Sterling is trading broadly flat this morning, after a quiet couple of trading sessions on Thursday and Friday. News headlines have focussed on Friday’s tragic events near London Bridge. The Confederation of British Industry released their latest economic forecasts this morning, while calling for an “ambitious deal” with the EU. CBI chief economist Rain Newton-Smith said in an interview recently that the trajectory of talks would be crucial for reviving business investment, which has been in contraction this year. The European Union’s financial services chief Vladis Dombrovskis was in the headlines this morning. He warned the Financial Times that although Brussels was willing to grand the UK access to European financial markets through “equivalence” decisions, these would be contingent on continued alignment with EU rules. This morning’s data has included Markit’s Manufacturing Purchasing Managers’ Index, which rose to 48.9 for last month, slightly better than expected but still indicating overall contraction in the sector. Equivalent indices for Construction and Services will be released on Tuesday and Thursday.
The euro saw a brief patch of volatility on Friday, weakening rapidly before rallying in the late afternoon. This morning’s news includes Angela Merkel taking a hard line with the new leadership of her Social Democrat coalition partners, saying there would be no renegotiation of the terms of their alliance. This morning’s Markit Manufacturing Purchasing Managers’ Indices for the Eurozone contained few surprises, as the final index for the Eurozone as a whole read 46.9, with Germany as the major underperformer. Popcorn will be called for at 14:00 BST, as incoming European Central Bank President Christine Lagarde will testify to European lawmakers in Brussels, and presumably reiterate previous calls for fiscal easing.
US markets were quiet as usual over the Thanksgiving break, but the news and data calendar is likely to pick up this week. The most relevant issue remains US-China trade talks, with less than two weeks to go before the scheduled imposition of further tariffs on consumer goods. The imposition of “list 4B” of tariffs is widely expected to be cancelled or delayed due to success or serious progress in US-China trade talks, but the recent signing of legislation in the US aimed at supporting protests in Hong Kong may throw a spanner in the works. In Washington, impeachment proceedings for President Trump will continue this week, with the House of Representatives deciding on formally bringing impeachment articles forward. Manufacturing surveys from Markit and ISM will be released today at 14:45 GMT and 15:00 respectively. Later in the week, the monthly Non-Farm Payrolls report will be released on Friday.
The loonie also saw a patch of volatility on Friday, briefly weakening against the dollar before rallying through to the end of the afternoon. This week will be pivotal for the loonie, with the Bank of Canada announcing its rate decision on Wednesday, and OPEC meeting on Thursday and Friday.