GB POUND
The pound started the week on the back foot against all of the majors, following Theresa May’s first televised interview of 2017.
Mrs May said the UK would have much tighter controls on immigration and secure the best possible trade deal, she said “people who thought the country can keep bits of EU membership were missing the point that it would be leaving".
The PM’s comments fuelled fears of a “Hard Brexit” which caused the pound to drop to 1.2138 against the US dollar, and 1.1525 against the euro.
Sterling has dropped 20% against the US dollar since Britain voted to leave the EU and it is expected that it will drop a further 5% against the US dollar when article 50 is triggered in March.
The head of the London Stock Exchange warned on Tuesday that “Brexit” could pose a serious threat to the global financial system and could mean 1000’s of jobs would be in danger. London is a major clearing centre for contracts and if the UK is denied access to the single market, it would mean this function would need to be transferred to some of the other member states, most probably Germany.
EURO
The unemployment rate in the Eurozone remained unchanged in December at 9.8%, the same as Novembers seven-year low.
Industrial production increased in the eurozone month-on-month in November, forecast at 0.6% the figure came in at 2.2%.
More good news for the eurozone on Wednesday, as Italy’s economic minister Pier Carlo Padoan confirmed that the Italian bank Monte dei Paschi will not need help from the European Stability Mechanism. The bank will receive €66bn in state aid.
On Thursday the euro hit a one month high against the US dollar following a raft of positive economic data.
Industrial production in the eurozone beat expectation posting a month-on-month figure of 1.5%, the year on year figure posted at 3.2%.
Germany reported its fastest pace of economic growth for 5 years as estimated figures from the Federal Statistical Office showed GDP was 1.9% higher in 2016 than in 2015.
US DOLLAR
President elect Donald Trump looks set to test the anti-nepotism law in the US, as he looks set to appoint his son-in-law Jared Kushner as his senior adviser. The law was passed in 1967 after John F Kennedy allowed his brother to become the attorney general. There are plenty of loopholes so it’s expected Trump will get his wish.
Trump also gave his first speech following the election, he spoke about the alleged Russian hacking scandal, and conflicts of interest surrounding the Trump empire.
Elsewhere
Official figures showed that inflation in China has increased, producer price inflation (PPI) posted at 5.5% the strongest number in five years.
Chinese exports suffered their biggest drop since 2009 official figures have shown. Exports fell by 7.5% in 2016, and imports fell by 5.5%. The much weaker than expected performance will ring alarm bells that global demand is slowing.
