Investors will focus this week on the British Parliament's vote on Prime
Minister Theresa May's Brexit plan and the European Central Bank's monetary
policy meeting, as well as some important data from major economies.
Pound Sterling
The British pound continued its decline last week amid uncertainty over
whether May could persuade the Parliament to vote in favor of the recent Brexit
agreement, which was approved by the European Union.
The latest forecast suggests that Parliament may reject May’s plan,
which will complicate matters and further cloud the future status of Britain's
EU relationship. Hence, this will keep the pound under negative pressure.
In case the Parliament voted for the Brexit proposal, which needs a simple majority, it is widely expected that the sterling would rise and start rebounding.
However, some reports have pointed the U.K. government may cancel Tuesday's Parliamentary vote on the Brexit withdrawal deal.
For the economic reports due from Britain this week, the most important
will be unemployment, industrial production and goods trade balance.
US Dollar
The dollar continued to play the role of safe haven currency last week, ahead
of Federal Reserve Chairman Jerome Powell’s testimony and the release of important
economic reports from the U.S. this week.
Fed Chairman Powell is due to testify on the economic outlook before the
Economic Committee of Congress in Washington DC after being postponed last
week.
Powell’s comments may affect the dollar's movements, especially after the
latest remarks from Powell have signaled the Fed’s interest rate was near neutral
levels.
On the economic front, after a 0.6 percent rise in October, the US
producer price index may show a 0.1 percent increase in November, while it may
fall from 2.9 percent year-on-year to 2.5 percent, according to analysts'
expectations.
U.S. consumer price index may show a 0.1 percent rise in November and stabilize
at an annual 2.5 percent.
US retail sales data, which measure the strength of consumer spending, may
signal a 0.4% surge in November after a 0.8% rise in October.
Euro
The euro got some relief from the dollar’s retreat last week, yet the slowing
economic growth in the eurozone and the Italian budget concerns could put the
single currency under selling pressure once again.
Perhaps the most notable event this week is the ECB's monetary policy
meeting, as policymakers will decide interest rates and may announce the end of
the asset-purchases program.
If the central bank announced the end its asset-purchases program by the
end of December, it should give a positive boost to the euro, but market
watchers will also focus on eurozone growth and inflation projections.
The most important data for the week will be the Composite PMI for December,
which includes the manufacturing and services sectors.
Analysts are in favor of seeing a slight slowdown in euro area private
sector’s growth pace to 52.5 from 52.7 in November.
Commodities
Last week, gold rose strongly after sharp sell-off in global equities and
a retreat in the greenback.
But gold needs to hold above $1240 an ounce to complete its robust rebound,
while it may still find support near $1220 an ounce.
The precious metal could get its direction this week from the movements in
global stock markets as well as the dollar, taking in mind that the Parliamentary
vote on the Brexit plan can have a significant impact on the general sentiment.
As for oil, it rebounded after OPEC and its allies agreed to cut production
by 1.2 million barrels a day, but prices remained to hover near record lows.
Eyes will focus this week on the U.S. crude build for last week, where
the EIA government report may show crude stockpiles may have edged up by 2
million barrels in the week through Dec. 7 after a significant drop of 7.32
million barrels a week earlier.
