Events that marked the week:
With no major data releases from the UK last week, and with holiday season tighter range trading, markets are still speculating on fact is Sterling overpriced at the moment and when will BoE hike interest rates. Several Bank policymakers, including Governor Mark Carney and even hawkish rate-setter Martin Weale have played down the prospect of a rate rise in the next few months as a renewed fall in oil prices and weak wage growth keep inflation well below the Bank's 2pc target.
Deutsche Bank said more fiscal consolidation next year relative to this year would make it “challenging” for the Bank of England to raise interest rates if austerity weighed on growth. “[Since November] oil prices have fallen more and the inflation data are showing signs of slowing.
So if we don’t have a hiking cycle in the first half of next year, there is a risk that we don’t have a hiking cycle at all.” Markets currently expect the Bank to raise rates in January 2017.
From the UK, on Wednesday, UK House Price data was released. UK house prices increased by 0.8% in December, with the annual pace of house price growth picking up to 4.5%, from 3.7% in November. Analysts were anticipating 0.4% increase. After moderating during the first six months of 2015, house price growth remained in a narrow range between 3% and 4.5% in the second half of the year. This is broadly in line with earnings growth and close to the pace we would expect to prevail over the longer term.
This week markets will be looking at:
Manufacturing PMI (Monday 10:30)
Construction PMI (Tuesday 10:30)
Services PMI (Wednesday 10:30)
Trade Balance (Friday 10:30)
