The pound remained strong against the euro after report showed that UK manufacturing shrank less than economist projected in December. A gauge of factory output rose to 49.6, beating the estimates of a drop to 47.3 from a revised 47.7 reading in November. However, this reading is far from positive as any reading below 50 indicates contraction in the sector. The debt crisis in the Eurozone, the UK’s largest export market, has worsen the outlook for manufacturers, and the Bank of England has indicated the UK economy may have stagnated. There are no other major economic releases or public speeches scheduled for today. Looking to the week ahead, we receive the construction and services PMI reports for December. We expect the construction PMI to fall to 51.8 from 52.3 in previous reading, while the services gauge is expected to fall to 51.5 from 52.1 in November. Expect for the pound to remain supported versus struggling euro as European leaders start the year in fear of preserving the single currency.
The euro gained against the broadly weaker dollar during the overnight trade, but remained subdued against the pound on concern the Eurozone debt crisis will hurt the economic growth in the region. The single currency found some support during early morning session after German Unemployment figures fell more than economists predicted in December. The number of people out of work fell to 2.89 million, pushing the jobless rate to 6.8% from 6.9% in November. Looking to the weak ahead, European manufacturing and services output headlines the economic calendar, with the expectations for the figures to shrank in December.
The dollar dropped during the Asian session after reports showed PMI manufacturing in China expanded more than expected in December , and investors dumped the dollar and went into so called “riskier assets”. Federal Reserve Minutes release and ISM Manufacturing report are due out today, with the expectations for the manufacturing gauge to expand to 48.0 from 45.0 in November. Looking to the weak ahead, December employment figures headline the economic calendar, with the expectations that the hiring in the world’s largest economy probably accelerated. However, more jobs are needed to sustain the economic recovery.
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