UK EU Envoy resigns

• The UK’s EU envoy Ivan Rogers abruptly resigns
• UK Manufacturing PMIs surprised to the upside in December
• Today markets will focus on the release of the FOMC minutes (19.00)

Market News

Britain’s ambassador to the European Union, Sir Ivan Rogers, resigned yesterday without explaining his reasons for doing so (Financial Times). Sterling immediately sold off on the news, with GBPUSD hitting 2-month lows of 1.2200 yesterday afternoon (Bloomberg)

UK Manufacturing PMIs surprised to the upside in December, hitting a 30-month high at 56.1. The headline Manufacturing increase (+2.5 points) was driven by a significant strengthening in output and new orders indices

The two and half year high was supported by solid domestic and external demand. In particular, panelists reported strong inflows of works from India, China, the US and the EU, as the weakness of the pound provided a boost to export competitiveness

US Manufacturing PMI also beat expectations, suggesting a strong end to the year for American manufacturing

This week, markets will turn attention to central bank meeting minutes from the US this evening and Euro area (Thu), with the key focus on the US employment report on Friday.

This evening’s FOMC minutes should cast further light on how the committee came to its decision in December to raise rates and give context to the three points we took away from the meeting:

1. Higher dots with further room to move higher given most participants did not incorporate Trump’s expansionary fiscal policy;
2. Less concern about the effect of a strong dollar and higher US rates; and
3. Diminishing appetite for running a “high pressure” economy, where rates are kept lower than they should be

Specifically we think that the market will be focused on any rationale for the shift higher in the median dots, now plotting 3 hikes this year

Todays’ currency rates:

via Barclays