GBP
After opening at 1.2819, Sterling retreated steadily and had lost a full cent on the Dollar by elevenses. November manufacturing PMI beat forecasts and printed a two-month high of 53.1, overall output and new orders were slightly up but export orders dropped for the second successive month. The Pound fell through the 1.1235 level against the Euro and hit five-week lows near 1.2700 against the Dollar.

The government published choice details of the Brexit legal advice; focusing on an option to exit from any backstop arrangement. Major doubts remained as to whether the government would be able to encourage potential rebels back onside and the expectation of defeat and the uncertainty that will follow continued to undermine Sterling support. British Retail Consortium and Visa retail spending data indicated weakness in November and fragile confidence. Sterling remains on the defensive against the Euro at around 1.1190 ahead of the parliamentary Brexit debate.

USD

The Dollar weakened across the board yesterday as a temporary truce was declared with China. The currencies that had previously been battered by the trade war have widely fought back as investors bought up riskier assets.

The US ISM manufacturing index strengthened to 59.3 for November from 57.7 previously and above consensus forecasts of 57.6 as new orders increased at a faster pace. Employment remained strong, although there was a slowdown in the pace of price increases with the lowest reading since July 2017, maintaining expectations that lower oil prices would cap inflation.

Federal Reserve (Fed) Governor Brainard stated that the US economy was at or beyond full employment while Dallas President Kaplan stated that the Fed should tread carefully and be very cautious over considering a further increase in interest rates. Fed Chair Powell confirmed that Wednesday’s planned testimony to Congress had been postponed while he remained optimistic on the economic performance.

EUR

Eurozone PMI manufacturing for November printed 51.8, slightly up from the flash reading although the market shrugged it off due to scepticism over prospects, especially with weak Italian data. The Euro initially pushed higher as the Dollar continued to lose traction, although it failed to sustain the gains. Italian Deputy Prime Minister Salvini stated that Italy had no interest in a collision with the EU, although he also stated that the budget fundamentals would not change and the Euro dipped to below 1.1350 as uncertainty dominated.

Data to Watch:

03:30 AUD RBA Rate Statement (Dec)
03:30 AUD RBA Interest Rate Decision (Dec 4)
08:15 CHF Consumer Price Index (YoY) (Nov)
09:15 GBP BOE’s Governor Carney speech
09:30 GBP PMI Construction (Nov)
N/A NZD NZD GDT Price Index
15:00 USD FOMC Member Williams speech
18:00 GBP MPC Member Vlieghe speech