GBP

The pound fell across the board on Friday following
comments made by Bank of England Chief Economist Spencer Dale that interest
rates will stay low in the UK for the foreseeable future.

GBP

The pound fell across the board on Friday following
comments made by Bank of England Chief Economist Spencer Dale that interest
rates will stay low in the UK for the foreseeable future.

As we have seen over the last four months, the pound has
been supported by the expectation that the Bank of England may increase
interest rates on the back of an improving economic outlook. However, we have
seen a consistent rhetoric echoed by members of the BoE stating that a hike in
interest rates will only occur if we see a sustained period of economic growth
– which is what we saw again on Friday by Dale.

The pound fell for the second consecutive week against
both the US dollar and the euro.

EUR

The euro continued to be supported on Friday despite data
from Eurostat showing that employment fell in line with forecasts by 0.8% in
the third quarter. The underlying theme of the prospect of further monetary
easing continuing so subsided was further supported as inflation in Spain rose
to 0.2% in November.

USD

With all eyes on this Wednesday’s monetary policy meeting
in the US, we did see some profit taking on the US dollar as although producer
price index figures, released on Friday, showed an improvement in November from
October, the data did marginally miss expectations coming in at -0.1% instead
of being unchanged at 0.0%

Recent data has started speculation that the Fed may
start to taper its monetary policy programme on Wednesday but it does appear
that investors are reluctant to strengthen the US dollar any further until a
formal announcement is made by the Fed.

JPY

Data from the Tankan survey was mixed from Japan; with
the manufacturing index rising to 16 from 12 in the fourth quarter but services
failed to rise to 17 from 11, only climbing to 14. The yen strengthened very
minimally only by 0.15% off the data.

Today

The pound started the day well after Rightmove revealed that
house prices increased by 5.4% in December.

The euro has continued its recent bout of strength after
Markit manufacturing figures from Germany and the Eurozone improved in
December, although service sector figures did fall short of expectations ECB
president is set to make a speech in the afternoon.

Data from the US today could well be supportive for the
US dollar as manufacturing figures form Markit and NY Empire state are
forecasted to have improved in December and industrial production is also set
to have improved in November. However moves on the US dollar will be limited as
markets will most probably wait until Wednesday decision before cementing a
viewpoint on the US dollar.

Key
Announcements:

13.30pm – USD – NY Empire State Manufacturing Index
(Dec): Expected to improve to 4.50.

13.58pm – USD – Markit Manufacturing PMI (Dec): Expected
to improve to 55.00.

14.00pm – EUR – ECB President Draghi Speech.

14.15pm – USD – Industrial Production (Nov): Expected to
increase by 0.4%.