EUR

The
euro continued to strengthen yesterday following data from Markit revealing
Eurozone manufacturing grew at a faster pace than analysts were expecting and
the PMI monthly composite report (combination of both manufacturing and
services) also grew faster than expected.

However
a breakdown of the figures does reveal that whilst Germany’s economy continues
to strengthen; other economies in the Eurozone are struggling.

EUR

The
euro continued to strengthen yesterday following data from Markit revealing
Eurozone manufacturing grew at a faster pace than analysts were expecting and
the PMI monthly composite report (combination of both manufacturing and
services) also grew faster than expected.

However
a breakdown of the figures does reveal that whilst Germany’s economy continues
to strengthen; other economies in the Eurozone are struggling.

Markit
PMI data from France’s composite of manufacturing and services contracted for
the second month in a row as well as falling to a seven month low. As a result,
Markit’s chief economist Chris Williamson suggests that France’s GDP will fall
by 0.1% in the current quarter – the second consecutive quarter that France’s
economy will have contracted and thus fears of another recession in France.

USD

The
US dollar finished marginally lower against most of its counterparts following
disappointing manufacturing figures. Markit revealed that manufacturing PMI
failed to rise up to expectations and was actually lower than the previous
month coming in at 54.4 in December.

Whilst
the NY Empire State manufacturing index rose to 0.98 in December from -2.21 in
November, the data also failed to live up to a rise to 4.5.

The
silver lining from the releases in the US came after data revealed that US
industrial production increased beyond an expected 0.5% to 1.1% in November.

AUD

In
the release of the December minutes, the Reserve Bank of Australia maintained
their stance that the currency remains too high as well as maintaining the
option to keep monetary policy loose. Thus the central bank would be open to
further interest rates cuts should they need to.

Today

We
could well be in for a volatile day today as inflation figures from the
Eurozone, UK and the US are all in focus.

UK
inflation is forecasted to remain at 2.2% in November. However there are some
reports suggesting that the rate could fall to 2%, closer to the Bank of
England’s target. This could well be detrimental for the pound as thoughts of a
hike in interest rates would be put on the back burner.

Eurozone
inflation is forecasted to increase to 0.9% in November from 0.7% in October. A
rise in inflation should alleviate the ECB of needing to add to monetary
stimulus, a practice that would weaken the euro.

And
finally US inflation is forecasted to rise to 1.3% in November from 1% in
October. One of the criteria for tapering monetary stimulus in the US is for
inflation to be just below 2%. So a rise in inflation could cause US dollar
strength.

Key Announcements:

9.30am
– GBP – Consumer Price Index (Nov): Expected to remain at 2.2%.

10.00am
– EUR – Consumer Price Index (Nov): Expected to rise to 0.9%.

10.00am
– EUR – ZEW Economic Sentiment (Dec): Expected to increase to 60.9.

10.00am
– EUR – German ZEW Economic Sentiment (Dec): Expected to increase to 55. 

13.30pm
– USD – Consumer Price Index (Nov): Expected to increase to 1.3%. 

22.30pm
– AUD – RBA’s Governor Glenn Stevens Speech.