Focus for this week will be on the Federal Reserve’s Beige Book report and retail sales figures. Investors will begin to size up the strength of the US economy and the consumer as they look forward to the end of the month FOMC meeting. It will be Bernanke’s last and so far there is little indication that policy makers will not go through with additional tapering measures to its QE programme. The eurozone faces some output figures from Italy, which could stir trade. Output in Germany and France surprised markets by being better than forecast. In the UK, sterling has been pushed back from one-year highs seen against the euro. Output figures in the UK were disappointing and stand in contrast to PMI surveys. Focus in the UK will be on inflation figures and consumer demand.

Sterling

Output figures showed seven sectors losing steam, prompting concerns over the sustainable nature of the recovery and calling into question the accuracy of PMI figures. PMI figures have stood in contrast with official ONS data. While output data was disappointing, focus will be on inflation and retail sales. The rate of inflation has fallen exceptionally close to the bank’s two per cent for the first time in years.

US dollar

The ADP employment report and weekly jobless claims figures ended up misleading the market with release of non-farm payrolls. The dollar faced rapid selling pressure after the payrolls data was much weaker-than-forecast coming in at 74k, instead of the 197k expected. Helping to offset some of the disappointment was the drop seen in the rate of unemployment. The rate of unemployment dropped precipitously close to the FOMC’s target of 6.5 per cent. For the month of December the rate stood at 6.7 per cent but is likely skewed positively by seasonal factors.

Euro

French industrial output released did not hurt the euro. Output rose three per cent m/m, which was better than the forecasted gain of 0.4 per cent. The output figures, alongside an upwardly revised Q3 GDP figure for the eurozone on a year-on-year basis to -0.3 per cent from a previous estimate of -0.4 per cent, helped the euro to hold on to levels against the US dollar as all eyes were focused on the US non-farm payrolls report. The euro was then aided by US data.

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