US Consumer Optimism Climbs

The US dollar rallied over a basket of major currencies ahead of the last major economic data due before the end of the year. Despite softening versus major peers after the Federal Reserve decided to hike interest rates on December 16^th, the US dollar continued to gain against the Pound Sterling, reaching a multi-month low of 1.4784 before rebounding modestly to the upside.  Recent gross domestic product values obtained for the third quarter indicated a slowdown in the UK economy while recent mixed data have points have served to weaken the Pound even further. As a result of decelerating growth and low inflation, the Bank of England has kept monetary policy unchanged and is unlikely to move on interest rates until inflation expectations are anchored, keeping pressure on the Pound.

European shares moved upwards after the Christmas holiday break, continuing recent bullish momentum higher despite seasonally low trading volumes. The FTSE 100 climbed 0.96% to 6314.57 while other European indices, such as the German DAX and the French CAC, mirrored the upward trending motion, with gaining 1.94% and 1.81% respectively. The UK construction sector in particular was stronger due to the damage caused by recent weather conditions such as the floods that are occurring in the northern regions.  Miners were the biggest drag on the index as prices for aluminum and copper keep declining despite oil prices having stabilized for the time being. Further losses in the Pound and Euro will continue make equities more attractive, with the Bank of England and the European Central Bank focused on keeping monetary policy accommodative in order to stimulate growth.