Sterling gained yesterday against the USD, recovering some of the ground lost last week as investors focus on a busy week of UK economic releases and the BoE policy meeting
via Barclays
This week’s UK economic calendar opens today with the release of November’s inflation figures, which are expected to show a slight rise. Market expectation remains that prices are likely to spike higher next year as Sterling’s weakness feeds through. Yesterday also saw UK Finance Minister Philip Hammond backing the idea of a transition period between Britain leaving the European Union and the finalisation of its new relationship with the bloc
The BoE is expected to keep monetary policy unchanged on Thursday and repeat its November message. Barclays Research note “…the MPC appears comfortable with its current balanced stance and likely will want to see some diverging data before changing its rhetoric…”
Overnight Asian equities were mixed, with no strong momentum in either direction. This is in line with the moves in US and European stock markets yesterday. In the US, the S&P closed down 0.12% and Nasdaq closed 0.59% lower, however the DOW posting another record closing high up 0.19% just shy of 19800.00
Italian politics remains a key focus. Over the weekend, President Mattarella appointed Foreign Minister Gentiloni as Prime Minister with a mandate to form a new government
Barclays Research “…think that snap elections in Q2 2017 are more likely than general ballots in Q1 2018. We do not think it will be in the interest of the new government to oppose likely mounting pressure from opposition parties to go to an early ballot once the voting system reform is approved…”
The FOMC meeting is in focus this week. In line with market expectations and what is already priced into futures, we expect the Fed to raise the target range for the federal funds rate by 25bp on Wednesday
What to Watch for Today
The key data today comes from the UK, with the CPI release for November at 9:30 (Barclays Research: 0.1% m/m, Consensus: 0.2% m/m), alongside UK RPI (Barclays Research: 0.1% m/m, Consensus: 0.2% m/m)
