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Politics and economics in equal measure as December rolls in


Manufacturing Purchasing Managers’ Indexes (PMI) from both the UK and the Eurozone will kick the month off, and this print could make awkward reading for either side. The European Central Bank (ECB) is pushing for a move towards tighter monetary policy, so failure for the final November Eurozone reading to be revised higher—and forecasts suggest no change from the previous 51.5 print, a 30-month low—could raise further questions over the central bank’s ambitions. Conversely, despite the UK economy wavering ahead of Brexit, expectations are for a significant jump from 51.1 to 51.5. This would have the potential to pressure the Bank of England (BoE) over its very gradual approach to rate increases. The weak Pound is understandably helping exporters, but as the country moves towards an uncertain spell, any currency advantage has the potential to provide something of a buffer. Bank of England Chief Economist Andy Haldane is also scheduled to speak on public policy. 


The first of five days of Brexit debates kick off in Parliament today, although the current assessment is that Theresa May stands to lose the motion when voting takes place on December 11th. With a hard-line stance of no other deal being on the table and failure paving the way for a no-deal outcome, the tone of these debates will be closely followed. Hostility is to be expected, but signs that the Prime Minister is completely devoid of support will inevitably weigh on the Pound. 

BoE Governor Mark Carney is also due to speak to Members of Parliament today, to provide fresh insight over the Bank’s assessment of a no-deal Brexit. Pushback has already been seen from last week’s forecasts as many felt they were unduly pessimistic, so markets may see further justifications here. 


Following on from Monday’s Manufacturing PMI prints, corresponding details of the services economy will be published during the morning. Again, the Eurozone is expected to see no change from the previous November estimate of 53.1, while the UK reading is forecast to show some modest improvement, up to 52.5 in November from 52.2 in October. Eurozone Retail Sales for October can also expect to be under scrutiny as confirmation of the expected 0.2% month-on-month increase could provide some validation for the hawkish stance the ECB is so keen to pursue at present. 

Across the Atlantic, the ADP payroll data is due for publication. With Jerome Powell’s recent commitment to easing off on interest rate hikes, the market will be looking for a number that’s not too ambitious. Forecasts are calling for 197,000 against last month’s 227,000. Anything much above this would open the door for more questions over whether the Fed can keep inflation in check if it does start to ease off the rate hike agenda. 

The second day of the Brexit debate is also scheduled in Westminster. The Bank of England releases the full findings of its bank stress tests ahead of Brexit, while ECB members speak on banking supervision. 


The Organisation for the Petroleum Exporting Countries (OPEC) meeting in Vienna is scheduled to take place today, putting the political agenda at the forefront again. Side conversations at the G20 will have been actively discussing the agenda here, but with both Saudi Arabia and Russia finding themselves marginalised following recent events, the two oil majors could very well end up dictating the agenda. Commodity currencies could see some volatility off the back of any surprise calls too. 

US Factory Orders for October are also expected, and these could present something of a shock to the system. Following the September uptick of 0.7%, a contraction of 2.0% is anticipated, underlining the fact that Trump’s trade tariffs have been far from universal good news for the manufacturing sector. 

The final day of Brexit debate for the week will take place in Parliament, before resuming on Monday 10th December. 


European unemployment data may give further clues as to the validity of the ECB’s approach to policy tightening on Friday morning. A year-on-year increase of 1.3% is being forecast, which would arguably be sufficient to confirm that rate hikes won’t prove too detrimental. Although, one number in isolation is equally far from convincing. 

However, the big number for Friday will be the US Non-Farm Payrolls print, plus the arguably more important Average Hourly Earnings number. Payrolls should show robust growth of around 200,000, but if wages run much above the forecast 3.1%, then this will call into question the Federal Reserve’s ability to manage inflation effectively with low rates and presumably no intention to hit the electorate with corresponding tax rises.