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December 2015

Daily Currency Insight

Published: Friday 18 December 2015

  • UK economic landscape continues to improve
  • IFO index fell to 108.7
  • Canadian inflation data is expected to be flat this afternoon
The economic landscape in the UK continues to improve as it was reported that retail sales rose by 1.7% last month exceeding forecasts for growth of only 0.5%. Black Friday discounts were behind the move as consumers spent online and on the high street. Volumes were up probably due to the discounting however the total amount spent was also up on the year by 1.4%. Hopefully that will be reflected in my Christmas stocking next week. The Pound barely moved on the news as events elsewhere took centre stage.
 
The Euro lost a little ground yesterday as German business sentiment unexpectedly deteriorated in December. The IFO index fell to 108.7 after rising to 109.0 in November. The weaker figure, although a disappointment, is still fairly robust particularly considering weaker global trade and rising geo political tensions. The single currency will almost certainly remain under pressure while traders get to grips with the increasingly divergent monetary policy stances of the ECB and the Federal Reserve.
 
Canadian inflation data is expected to come in relatively flat this afternoon. The Bank of Canada has stated that the drop in energy prices and the depreciation of the Canadian dollar are having a temporary impact on inflation so the core reading will be closely watched. This has been fairly robust of late (2.1% last month) and another rise would put it above the BOC's target. The Central bank will probably remain on hold for the time being especially in light of the weaker oil price but this afternoons data will be closely watched.
 
Today is fairly light in terms of data and as traders square their books and look ahead to the holiday season. Markets seem inclined to purchase US dollars after the recent rate hike and I expect that mood to continue into year end. 

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