Daily Report 05/01/2022

UK mortgage approvals edged lower to 67,000 for November from 67,100 the previous month while net consumer borrowing increased to £3.7bn from £1.1bn as consumer credit held firm on the month. There was the limited impact from the data given that the spread of Omicron will dominate near-term trends in the economy and had no impact on November’s data. The final PMI manufacturing index was revised slightly higher to 57.9 from the flash reading of 57.6. Sterling was able to resist selling pressure and gradually gained traction during the day with sentiment underpinned by a fresh move  against the dollar. Prime Minister Johnson continued to resist any further coronavirus restrictions in England which provided an element of UK currency support, especially in relative terms, although there were reservations over the very high case numbers. A dip in demand for defensive assets also supported the UK currency.

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German unemployment declined a further 23,000 for December after a 34,000 fall the previous month and compared with expectations of a 15,000 decline. Retail sales increased 0.6% for November with a 2.9% annual decline and slightly stronger than expected, but there was little impact from the data releases. ECB council member Villeroy stated that inflation is close to peaking in France and the Euro-zone and the Euro overall lost ground into the New York open with a retreat against the dollar as yield spreads undermined the single currency.

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The US ISM manufacturing index declined to 58.7 for December from 61.1 the previous month and below consensus forecasts of 60.0. There were also modest slowdowns in the growth rate of new orders and production. Employment increased at a slightly faster rate on the month while order backlogs increased. There was a slight easing of supply-side difficulties on the month while there was a significant easing of pricing pressures with the prices component at the lowest level for 13 months. The JOLTS job-opening data recorded a decline to 10.56mn for November from 11.09mn the previous month and below market expectations, although the higher quits rate continued to indicate a tight labour market which will tend to maintain upward pressure on wages. The latest New York survey suggested that pressures in global supply chains may have peaked with markets and the Federal Reserve watching developments closely.

Key Data 

13.15 ADP Employment Change (Dec) Exp. 400K Prev. 534K
19.00 FOMC Minutes