On Wednesday I alluded to the fact that there were no economic releases for the UK so attention would no doubt turn to Brexit. And so it proved. The Daily Telegraph reported that Prime Minister Theresa May was facing a revolt from Cabinet members including Boris Johnson and Michael Gove who are against a soft Brexit. Sterling reacted by weakening against the dollar.
It weakened further still when Brexit Secretary David Davis made the rather astonishing admission that the government has not done any analysis of the impact of Brexit on the UK economy. This was in response to a question by the Brexit committee on why he had failed to do as parliament demanded and provide the Brexit impact assessments. Curiously, Davis has repeatedly claimed that officials have been studying over 50 sectors of the economy.
The major economic data release of the day was the US employment change which was forecast to dip to 205,000 in November from 235,000 in October. However, the figure came in below expectations at 190,000. Still, it was a good day for the dollar, strengthening against the euro and pound as it did.
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GBP: Davis U-turn on Brexit impact analysis bewilders
On a day of no UK economic data releases, the main talking point was David Davis’s comments to the Brexit committee, where he said no Brexit impact analysis exists. Later, Chancellor Philip Hammond said that the UK would meet its obligation to the EU irrespective of whether a trade deal was agreed.
So it was rather alarming when No.10 countered that statement by saying “Nothing is agreed until everything is agreed in this negotiation.” It appears that everybody is pulling in different directions at the moment; countries within the UK, political parties in the UK; and MPs within the UK government. Sterling uncertainty looks set to continue for some time yet.
Having said that, should a deal be agreed sooner than looks likely at present, the relief around the City could see some significant sterling strengthening. Today we will see the Halifax house price index which is forecast to increase by 0.2% on a monthly basis.
EUR: retail PMI better than expected as German construction PMI slips
It was a bit of a mixed day for the euro yesterday, as it made some gains against sterling, but some slight losses against the dollar. No matter – it has performed remarkably well throughout 2017 and one wonders what would have to occur for this change before the year is out. Perhaps the UK agreeing a deal with the eurozone could boost the pound, but it remains to be seen whether this will be achieved before the deadline.
The most notable release of yesterday was the retail purchasing managers’ index figure which came in above expectations. It was forecasted to reach 51.5, but it actually hit 52.4. German construction PMI came in at 53.1 against an expectation of 53.6 (although any figure above 50 shows growth).
Today’s major release for the eurozone is the GDP growth figures. It will be interesting to see how the eurozone has performed of late, so definitely one to watch.
USD: employment change comes in below expectations but still positive
The major release of the day was the unemployment change figures from the US in November. 190,000 new people were employed by private companies against an expectation of 205,000 but the number is still promising.
Meanwhile, mortgage applications increased by 4.7% in the week ending 1 December 2017. The previous period they had fallen by 3.1% so the turnaround is rather encouraging. The dollar won the day by strengthening against the euro and sterling, but it is fair to say that, along with sterling, it has been pretty volatile of late.
Today we will see the initial jobless claims which are expected to fall from 238,000 to 236,000. However, the big release of the week is the non farm payrolls which are set to come in tomorrow.
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