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Sterling holds up in spite of poor car sales data

Published: Monday 07 January 2019

  • EU factory orders drop
  • Potential for US Dollar weakness​​​​
By David Johnson

Contradictory EU economic data was one of the themes of the turn of the year and we have started the first full week of January with more of the same. German factory orders dropped by 1.0% in November against forecasts of a 0.2% contraction. Oddly, German retail sales for November were spritely by comparison; a 1.4% gain was well above market forecasts and serves to confuse and concern in equal portions. We’ll get the EU retail sales data this morning. If that is equally wide of the market expectation, we can envisage Euro volatility this morning.
Pound pushes up a little
Sterling is a tad stronger (within recent ranges) in spite of 2018 producing the weakest new car sales in the UK for a decade. General economic uncertainty and concerns over the potential for higher taxes on diesels are being cited. 
Another US data bonanza
This afternoon brings a slew of service sector indices for the US. The general perception is that these will be slightly weaker than the previous month and that adds weight to the calls for the Federal Reserve to stay its hand and leave US interest rates alone for now. Federal Reserve Chairman, Jerome Powell, said on Friday that they were prepared to be patient and maybe Federal Reserve Bank of Atlanta President, Raphael Bostic, will have something to say on the matter when he speaks later. Weaker data would weaken the US Dollar unless a deal is put together with China and/or a resolution can be found to the budget for Trump’s Wall and the US government can get back to work.
Determined data diary for this week
That is about it for today, but the rest of the week brings an, almost certainly, ‘on-hold’ decision from the Bank of Canada, meetings from the last Federal Reserve meeting, minutes from the last European Central Bank (ECB) meeting, UK Gross Domestic Product (GDP) data and Australian retail sales. Those are the headlines, but there will be other data, too. In addition to these releases, the whole Brexit debate centres on Theresa May’s decisions on the ‘meaningful vote’ (as though no other votes are meaningful) and the rumours that the Prime Minister may have a new version of her Brexit plan up her sleeve. That would be tricky, because her sleeves tend to be ¾ length, but I am being pedantic…
Fiji fun
The news story that made me smile this morning is the woman in the blue dress promoting Fiji Water by the Photo screen at the Golden Globes awards. Apparently her name is Kelleth Cuthbert and she has done a fantastic job of getting herself and her employer’s brand all over the internet. I really hope they pay her a substantial bonus.
Precise directions
A grandmother is giving directions to her grandson who is coming to visit with his new wife. “I am in apartment 14T. You’ll see a big panel at the front door of the apartment complex. With your elbow, push button 14T. I will buzz you in. Come inside, the lift is on the right. Get in, and with your elbow, hit 14. When you get out, I am on the left. My doorbell is quite big, so you should be able to hit it with your elbow without a problem”.
“Grandma, that sounds easy, but why am I hitting all these buttons with my elbow?”
There’s a pause and then she says, “Were you planning on coming here empty handed then?”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:30 EU: Sentix Investor Confidence -0.3 -2.0
EUR 10:00 EU: Retail Sales 0.3% 0.2%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 57.2 58.1
USD 15:00 US: Non-Manufacturing Purchasing Managers' Index 60.7 59.6

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