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Euro Weekly Update - January 27th 2017

Euro Weekly Update

Neither the British nor the Euroland statisticians had much to say for themselves. The monthly round of provisional purchasing managers' indices, in which the UK does not participate, indicated that activity in the €Z private sector continued at a decent clip in January even if not all of the readings met expectations.

In Germany consumer confidence improved while business confidence deteriorated slightly. UK retail sales fell in December, perhaps as a result of consumers bringing forward their Christmas purchases to Black Friday in November and Britain’s economy expanded by a provisional 0.6% in the fourth quarter of 2016, slightly more than forecast.

Politics, not economic data, shaped the fortunes of the dollar and the pound. Sterling led the field for a second week, strengthening by two US and two euro cents. Its saviours were the Supreme Court ruling that parliament must approve activation of the Article 50 EU departure process and the government's promise of a white paper. Investors demonstrated yet again their preference for transparency over opacity.

In Westminster the government's reaction to the Supreme Court's ruling that parliament must approve the EU departure process was positive for sterling. Investors welcomed the promise of a white paper that should further clarify Downing Street's plans for Brexit and beyond.

In the US, pronouncements and executive orders of the new president were unhelpful to the dollar. His obsession with the numbers attending his inauguration worried investors, as did his readiness to quote "alternative facts" when the real ones don't suit. The prospect of a trade war with Mexico was another concern.

The dollar took a weekly loss of two cents to the pound. It was unchanged against the euro. Economic data played only a minor role. British retail sales for December were disappointing while growth in the fourth quarter of 2016 beat expectations. There were no important figures from the United States.

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