Price action in financial markets deprived of tier-one macro data has been rather subdued today. China, Hong Kong, South Korea and Japan were also on holiday.
The S&P 500 is up only marginally at time of writing after having posted two days of minute losses and as result is only down 0.1% from Monday’s close. Similarly the Dollar, which depreciated slightly yesterday, is just about in the green today. While it has weakened against the risk-sensitive Kiwi and
in particular Australian Dollar, it has made small gains against Sterling as well as the safe-haven Swiss Franc and Japanese Yen. Investors are seemingly rotating between currencies in the face of stretched valuations.
Sterling will be in focus tomorrow morning with UK GDP data for December and Q4 due for release at 07.00 local time. GDP contracted 2.6% mom in November and is unlikely to have rebounded strongly in December given that the UK was in lockdown throughout most of the month. The consensus forecast is that GDP growth slowed to just +0.5% qoq in Q4 from a record +16.0% qoq in Q3 which would imply growth of about +0.7% mom in the last month of the year. If correct this would imply that GDP growth in Q4 in the UK underperformed growth in the United States (+1.0% qoq) but outperformed growth in the
Eurozone (-0.7% qoq).
