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Market Report : 06.12.22

Published: 06/12/2022 By ECAP

Sterling struggled to find support yesterday, as a lack of important macroeconomic data led to trading on domestic headlines. As such, the continually darkening economic outlook for the UK led to sour sentiment around GBP. Looking forward, today brings the latest construction PMI figures for November. A slowdown from 53.2 to 52 may weaken support for Sterling. Ultimately, domestic news could continue to shape Sterling’s appeal in the coming days. Furthermore, as the country is grappling with an unfurling cost-of-living crisis and a recession, further downbeat news would likely pressure the Pound.

Retail sales in the euro area suffered their biggest monthly fall of the year, raising the chances that the European Central Bank will switch to smaller rate rises next week. Euro zone retail sales came in weaker than expected in October; a sign of weakening consumer demand that could herald the onset of the expected technical recession. Ultimately, the data bolsters the case of ECB policymakers calling for a switch to a smaller interest rate hike at its meeting next week, following two consecutive 0.75 percentage point moves.

The U.S. dollar edged higher in early European trade this morning, continuing yesterday’s hefty gains after strong U.S. services data. The Dollar Index rose to 105.31 after yesterday’s 0.7% rally, its biggest intra-day gain since the 21st of November. Yesterday’s data on non-manufacturing PMI unexpectedly rose, suggesting the country’s dominant services sector remained resilient in November. This followed stronger than expected jobs creation data released last Friday, and raised concerns that the U.S. central bank will be given the “green-light” to continue with its interest rate increases of 75-basis points for the fifth consecutive meeting next week.