Happy new year

Oh the irony
In the last 18 months the price of oil has fallen, in sterling terms, by 60%. Yesterday the big supermarkets cut diesel to under a pound, 25% less than 18 months ago. This morning the oil price has jumped 2% because of the spat between Riyadh and Teheran.

Having celebrated the new year by beheading 47 people, the Saudi Arabian authorities found themselves at the receiving end of self-righteous criticism from the Iranian authorities, who seldom execute more than half a dozen people at a time. To smooth things over, Saudi Arabia gave Iranian diplomats 48 hours to leave the country. Unsurprisingly, the increased political risk took the oil price a notch higher and prompted a scuttle towards the safety of the Japanese yen.

China provided some balance this morning with a half-point fall in the Caixin purchasing managers' index, to 48.2, and a subsequent sharp drop in Shanghai share prices. The 7% fall in equities might have been greater had it not been for the "circuit breaker" anti-volatility mechanism which came into action for the first time today. The news inevitably reawakened fears about the Chinese economy and weighed on the antipodean dollars. 

Limited festive cheer
The Christmas and New Year holiday was not a particularly enjoyable one for the pound. It weakened by an average of 0.3% - half a euro cent - against the other dozen most actively-traded currencies. Between Christmas Eve and today the yen was the clear leader.

Nobody paid much attention to the economic data at the end of last week. Norwegian retail sales were up by 0.6% in November, US pending home sales fell by -0.9% in the same month and Greek retail sales were down by an annual -3.9%. The Chicago purchasing managers' index, once upon a time the only PMI that anyone cared about, was down by six points at 42.9. It was the biggest monthly decline since July 2009.

It made little difference to the US dollar, which strengthened by a third of a cent against the euro and by nearly a cent against sterling over the long weekend. The yen came out on top, helped both by the tensions in the Middle East and by stock market nervousness. Sterling was unchanged against the Swiss franc and strengthened against the antipodeans: everywhere else it was lower.

Back to work
A busy week lies ahead. Today kicks off with the monthly round of manufacturing sector PMIs and the climax comes on Friday with the closely-watched US employment report.

As well as the Chinese measure, the Japanese and Australian PMIs were slightly lower on the month at 52.6 and 51.9. Sweden's 56.0 was the best in nearly two years. The UK figure is expected to be almost unchanged at 52.8, slightly behind Euroland's 53.1 but better than the two US readings.

The only non-PMI ecostats on the list are for German inflation and UK mortgage approvals, which should have exceeded 70k in November.