Prior to Chancellor of the Exchequer Phillip Hammonds Autumn Statement- his inaugural major Commons event; speculation was mounting that he would pull a rabbit out of the hat with a raft of measures designed to soften the blow of the BREXIT vote exactly 5 months ago to the day. The reality was akin to him pulling out a hamster from the aforementioned hat.
Growth predictions have changed as a result of the Brexit vote as was widely expected with the Office for Budget Responsibility upgrading UK growth in 2016 to 2.1% from 2.0% and downgrading to 1.4% in 2017 from 2.2%.
The Chancellor also stated that Government finances are forecast to be £122bn worse off in the period until 2021 due to lower growth and reduced tax receipts. Among the popular announcements was a freeze in fuel duty and more funds available for housing, transport and digital infrastructure. Although, historically, Budgets/Autumn Statements rarely have an effect on the FX market, investors still felt the need to take GBP higher over the course of the day with rises of approximately 1% across the board.
With all the commotion regarding the budget, you could be forgiven for ignoring EU and US data. The US numbers have been brought forward a day due to the Thanksgiving holiday on Thursday. We kicked off the day with French and German PMI numbers for the Manufacturing and Services sectors. The French Services PMI came out 52.6 against an expected 52.1 and Manufacturing meeting expectations with 51.5.
The German numbers also offering a mixed bag of result with Manufacturing at 54.4 instead of the anticipated 54.8. The Services sector fared better recording a reading of 55.0 against a forecasted 54.1. The Eurozone composite showing an 11-month high, signalling that despite political uncertainty, the economy is holding up well.
From the US, the only data release of note prior to the FOMC Minutes was the Manufacturing PMI coming out at an entirely respectable 53.9 compared with the expected 53.6. The minutes from the November meeting showed that despite keeping rates on hold, officials increasingly thought that the Fed should raise rates soon. This echoes the comments heard from Janet Yellen speaking to congress last week. The markets now have a 100% probability of a December rate hike priced in.
With Thanksgiving in the US, market participants are taking advantage and will be taking a 4-day weekend. By no means does this necessarily mean the markets will be quiet. The decrease of liquidity creates an environment where volatile movements are entirely probable.
The UK data calendar is barren, with European figures localised to Germany. Gross Domestic Product and IFO figures are due from the largest economy in Europe.