Good morning,

USD: Lowest since October

Sentiment on the US dollar continues to turn negative as commentators and analysts change their expectations as to how many interest rate rises the Federal Reserve will be able to make this year following weak data in the past few months. As of this morning, the USD is down to its lowest level on a trade-weighted basis since October with markets taking cues from both the Fed Chair’s acceptance that the central bank will be flexible and data showing that economic activity is slowing from its recent sugar high.

Yesterday’s look at the services sector was nowhere near as poor as the manufacturing number last week, however it still fell to a five month low. Companies within the services sector reported fears over tariffs, trade barriers with China and a lesser ability to pass on price hikes to their customers.

A lot of US data is being delayed by the government shutdown; the people doing the counting are simply not at their desks so we are getting an occluded view of what is going on in the States at the moment. The impasse stems from President Trump’s ransom of $5bn to fund his wall on the US/Mexico border. Trump is set to deliver a primetime TV address on the wall tonight.

Meanwhile, trade talks between the US and China are continuing in Beijing.

GBP: Brexit vote date set

Sterling was encouragingly quiet yesterday. Then again, not much actually happened. With regards to the ongoing Brexit debate, Downing St confirmed that the vote on Theresa May’s Brexit deal will take place on January 15th. I have received no news that makes me change my expectations that Theresa May’s deal will be defeated and so the focus must turn to what the government does afterwards, especially given the continual declarations that the UK will leave the European Union on March 29th – just 80 days from now.

Further debate on the Brexit deal will start in the Commons tomorrow and until then we think that the sterling will remain quiet.

EUR: German data takes single currency off highs

The European single currency was one of the main beneficiaries of the weak dollar yesterday, dragging itself close to the 1.15 level in EURUSD terms. The momentum remains with the single currency at the moment and we think that it is only a matter of time before the pair starts to sit comfortably above the 1.15 mark.

German data this morning has taken some air out of the euro however with industrial production in the country falling in November by 4.7%.

Have a great day.