A subdued Chinese session and new lows in oil, which fell $30 a barrel for the first time since 2003 caused strain on the markets yesterday. However it was the Pound that continued to slide after a surprisingly poor manufacturing report. The UK posted a dismal industrial and manufacturing numbers, with industrial production posting an 18 month low. Manufacturing production registered at -0.4%, whilst industrial posted -0.7%, both figures missing economists’ consensus. The data helped drive the Pound lower against the Dollar, which reached its lowest level since June 2010.
China stepped up its defence of the Yuan yesterday, buying the currency in Hong Kong and sparking a record surge in the city’s money market rates. Markets still expect the Chinese Yuan to depreciate, even after the People’s Bank of China pushed the overnight rate on the interbank market to 66.82%.
Meanwhile, data from the US continued to remain positive. The BLS JOLTS report for November, which focuses on job openings beat expectations and continued to point to upward pressure on wage inflation. In addition, the hiring rate was steady as was the quits rate. If this trend continues we are only going to see the sentiment for an early rate hike in the US continue.
Fairly quiet again today. With the unexpected decline of oil prices at the start of the year to a fresh 12 year low, much of the focus will be on the inventories for clues in price action moving forward. With inflation continuing to bump along the base this could be an important factor for potential monetary policy.