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December 2015

Daily Currency Insight

Published: Thursday 03 December 2015

  •  UK data underwhelms
  •  US ADP jobs numbers beat expectations 
  •  ECB meeting today – key event 
Sterling fell again yesterday as construction PMI growth fell to a 7 year low in November. The index declined from 58.8 in October to 55.3 last month comfortably below expectations of 58.5. Construction companies have become more cautious towards the end of the year although most are a little more upbeat for Q1 of 2016. Rumours of a Brexit persist continue to weigh on confidence and the Pound and today's services PMI will be very closely watched.
Positive data from the United States helped to keep the dollar buoyant yesterday. American businesses increased hiring led by strong gains in the retail and finance sector. ADP reported that 217,000 jobs were added in November which is the most in 5 months. Markets will look towards tomorrow's non-farm payrolls to further cement the idea that rates will rise at the next Federal reserve meeting. Fed Chairwoman Yellen was certainly upbeat when discussing the economy yesterday and she also noted the risks of waiting too long to begin raising rates. Barring a major setback it seems highly likely that we will see a move on the 16th. The outlook beyond that is less clear.
The focus today will clearly be on the ECB and the market is expecting something big. We could see a cut of the deposit rate further into negative territory along with a  significant extension of the size and tenor of quantitative easing. Most are expecting a "bazooka" from Mario Draghi and therefore a lot of this easing has already been priced in. We will find out at midday with markets sure to be volatile around the announcement providing opportunities for both buyers and sellers of the single currency.