Article Highlights

  • French industrial production m/m: -0.9% vs. -0.7% expected, 2.4% previous
  • French manufacturing production m/m: -0.8% vs. -0.7% expected, 2.4% previous
  • U.K. industrial production m/m: 1.1% vs. 0.2% expected, 2.0% previous
  • U.K. manufacturing production m/m: 2.1% vs. 0.5% expected, 1.4% previous
  • U.K. construction output m/m: 1.8% vs. 1.1% expected, 0.4% previous
  • U.K. goods trade balance: -£10.89B vs. -£11.45B expected, -£11.56B previous
  • Canada’s jobs report coming up
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Price action was relatively subdued during today’s morning London session. However, the pound, the Swissy, and the euro were clearly under bearish pressure. The yen, meanwhile, was broadly in demand.

Major Events/Reports:

U.K. industrial output climbsTotal industrial production in the U.K. jumped by 1.1% month-on-month in December, soundly beating expectations for a much softer 0.2% rise. The increase in December is the second fastest in 8 months and also marks the second straight month of positive readings.

The main driver for the surge in output were the 2.1% surge in manufacturing output, which added 1.43% to total industrial output. Unfortunately, all the other major components were drags. Year-on-year, industrial production jumped by 4.3%, which is the largest increase since January 2011. As a bonus, the previous month’s annual reading also got upgraded from 2.0% to 2.2%.

And looking at the breakdown, the 4.0% surge in manufacturing output was the primary driver, adding 2.84% to total industrial output. Although all the other components had positive contributions as well. Incidentally, the year-on-year reading for manufacturing output is the best reading since April 2015.

U.K. trade gap narrowsThe U.K.’s trade deficit in December was £3.3 billion, which is narrower than the £3.6 billion deficit that was reported in November. The narrower trade gap was mainly due to the narrower deficit in trade in goods (-£10.89B vs. -£11.45B expected, -£11.56B previous).

And the narrower deficit in trade in goods, in turn, was due to the 4.4% in exports. This helped total exports to jump by 2.2% month-on-month, resulting in the narrower overall deficit.

For all of Q4 2016, the U.K.’s trade deficit came in at £5.58 billion. This is significantly lower than Q3’s £14.43 billion. And this much narrower Q4 deficit, in turn, would be a positive contributor for Q4 GDP.

U.K. construction output surgesConstruction output in the U.K. was originally estimated to have tumbles by 0.2% in November. Fortunately, that was upgraded to a 0.4% increase.

Even better, the reading for December surged by 1.8%, beating expectations of a 1.1% jump. According to the report, the surge in December was “largely due to an increase in new work.” The 5.2% expansion in private commercial work, in particular, was a major driver.

Europe closing the week on a high note – Risk-taking continued for the fourth consecutive day in Europe, sending European equity indices higher once more.

  • The pan-European FTSEurofirst 300 was up by 0.20% to 1,449.38
  • Germany’s DAX was also up by 0.32% to 11,679.50
  • The U.K.’s FTSE 100 was up by 0.27% to 7,249.25

Even U.S. equity futures got a modest boost from the risk-on vibes in Europe.

  • S&P 500 futures were up by 0.07% to 2,305.75
  • Nasdaq futures were up by 0.10% to 5,217.38

Market analysts mainly pointed to risk sentiment spillover from the earlier sessions. Trump’s tax cut plans and net positive Chinese data, in particular, were being cited for the persistent risk-on mood.

Major Market Movers:

JPY – Despite higher bond yields and the overall risk-friendly environment in Europe, the yen just plowed through ALL its forex rivals during the session. There was no clear driver for the yen’s strength. However, it’s highly likely that yen shorts were just taking profits off the table after a bad week for the yen and ahead of talks between Donald Trump and Shinzo Abe.

USD/JPY was down by 27 pips (-0.24%) to 113.56, AUD/JPY was down by 20 pips (-0.23%) to 86.78, NZD/JPY was down by 21 pips (-0.25%) to 81.54

EUR & CHF – Things seemed pretty normal for the safe-haven Swissy and the lower-yielding euro, since they were both on the back foot during the risk-on session.

EUR/USD was down by 13 pips (-0.12%) to 1.0626, EUR/JPY was down by 44 pips (-0.37%) to 120.67, EUR/AUD was down by 17 pips (-0.13%) to 1.3904

USD/CHF was up by 11 pips (+0.11%) to 1.0040, AUD/CHF was up by 9 pips (+0.12%) to 0.7637, CAD/CHF was up by 12 pips (+0.16%) to 0.7642

GBP – The pound had a bad start, but got bid higher when a slew of positive U.K. data got released. However, the pound later gave back all its gains (and more) during the course of the session. Heck, the pound even ended up as the worst performing currency of the session. There was no apparent reason for the pound’s weakness. Although profit-taking in order to avoid weekend risk is a possibility after a relatively good week for the pound.

GBP/USD was down by 22 pips (-0.18%) to 1.2459 with 1.2519 as session high, GBP/JPY was down by 61 pips (-0.44%) to 141.78 with 142.22 as session high, GBP/CAD was down by 41 pips (-0.25%) to 1.6365 with 1.6445 as session high

Watch Out For:

  • 1:30 pm GMT: Canada’s jobless rate (steady at 6.9% expected) and net change in employment (-10.0K expected, 53.7K previous); read Forex Gump’s Forex Preview here
  • 1:30 pm GMT: U.S. import prices (0.3% expected, 0.4% previous)
  • 3:00 pm GMT: U.K. NIESR GDP estimate (0.5% previous)
  • 3:00 pm GMT: University of Michigan consumer sentiment index will released (98.0 expected, 98.5 previous)
  • 7:00 pm GMT: U.S. Federal budget balance (-$27.5B previous)

See also:

Asian Session Recap 
U.S. Session Recap

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