Backing off at the Fed
On Friday the US Bureau of Labor released a storming set of employment data, sending the dollar higher. Less than two hours later the Federal Reserve chairman told an audience that he would be patient in adjusting monetary policy, hinting at a pause in the tightening process.
US nonfarm payrolls rose by 312k in December, more than double the forecast 180k increase. Taking into account adjustments to previous months, there were 190k more people in work than analysts had predicted, almost a full month's worth. The news sent the dollar half a cent higher against the euro and the pound.
A little while later Jerome Powell sent it back down again. He referred to "muted inflation readings", saying "we are always prepared to shift the stance of policy and to shift it significantly". The market inferred that, despite pressure from the president to stop the rise of US interest rates, the Fed might be preparing to do just that. The net result was a 2.7% rise in US equity prices and an average loss of 0.8% for the dollar. It is down by more than a cent on the day and is the weakest among the majors.
Back to Brexit as usual
The prime minister kicked off the 2019 Brexit season with a Sunday morning TV appearance. She was very clear that her withdrawal bill will "definitely" be put to a vote in the Commons, even if defeat appears inevitable.
Sticking to the mantra that the bill is a "good deal" her approach seemed to be one of attrition: if nothing else is available, and if nobody can come up with an alternative, Parliament will eventually back it. If not, Britain would be in "uncharted territory".
Overnight, the prime minster received a letter signed by 200 MPs, asking her to rule out a no-deal Brexit. The vote is taking place on the 15th January 2019. Opposition to no-deal - on both sides of the leave/remain divide - is such that there might be an amendment to Tuesday's finance bill that would prevent such a step. On balance, investors seem positive about these latest developments. Sterling is unchanged from Friday morning and is two thirds of a cent higher against the euro.
Best of the rest
The newly dovish tone of the Fed was helpful to the commodity currencies. South Africa's rand came out best, followed by the Aussie. Euro zone inflation was a little softer than expected, as were most of the purchasing managers' index readings. Canadian employment beat expectations.
Britain's services PMI came in at 51.2, higher on the month and above forecast but not exactly scintillating. Headline inflation in the euro zone was a provisional 1.6%, lower than expected and down from the previous month's 1.9%. Canada created 9.3k new jobs in December and inflation remained at a low of 5.6%. The numbers were helpful to the Loonie but not as helpful as the noises from the Fed chairman.
There are no big-ticket statistics on today's list. Euroland reports on retail sales and investor confidence and there are PMIs from Canada and the United States. Don't forget to check the batteries in your Brexit alarms.