Currency markets are mixed on Friday after all three central banks, the ECB, BOE and SNB left interest rates unchanged although the ECB did raise its economic growth forecasts, while the SNB raised its long term inflation forecast.
In the US, the data was strong with the headline retail sales climbing by 0.8% mm in November, well above expectation of 0.3% mm, while the ex-auto sales grew 1.0% mm, also above expectation of 0.7% mm. In the labor market, the weekly initial jobless claims dropped by 11k to 225k, well below expectation of 239k, a level not seen since March 1973. The continuing claims dropped to 1.89m in the week ended December 1.
Earlier in the day, the EUPMIs generally strengthened in December, painting a brighter outlook for early next year and lending support to the Euro. The EU manufacturing PMI rose to 60.6 in December, up from 60.1 and beat expectation of 59.7, to make it the highest level on record. The EU services PMI rose to 56.5, up from 56.2 and beat expectation of 56.0. The German PMI manufacturing rose to 63.3, up from 62.5, above expectation of 62.0, while the Services PMI rose to 55.8, up from 54.3, above expectation of 54.6.
In other markets, stocks are slightly lower (but not before the DJI had made another all time high) as investors worried about potential roadblocks to the Republicans’ tax overhaul, offsetting any optimism over the strong retail sales/jobs data. The metals are mixed in a relatively narrow range while WTI has settled higher, ignoring data forecasting a faster than expected rise in US shale oil production next year, while an ongoing North Sea pipeline shutdown supported Brent crude.
Friday could be a relatively quiet end to the week, with not too much on the calendar. The Q4 Japan Tankan will get the ball rolling, which could create same waves in the Yen related pairs but there is then very little to go on apart from the EU Trade Balance, the UK Quarterly Bulletin and a speech from the BOE’s Haldane ahead of the US Industrial Production, Capacity Utilisation and the New York State Empire Mfg Index. Have a good weekend.
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