Iran retaliates

Markets are a little on edge this morning on the news of retaliatory strikes by Iran on US bases in Iraq. Yields in the core bond markets have moved down a little, stocks have fallen in Asia overnight (with European equities likely to follow suit this morning), and the dollar has firmed against the euro, though not by much, to trade at just under $1.1150. Oil prices, meanwhile, are marginally higher

The annual rate of headline CPI inflation in the Euro area picked up for a second month running in December to stand at 1.3% – its highest level since last April – while the core rate, which excludes food and energy prices, remained at 1.3% last month.  The headline rate is likely to move up further in the near-term given the rise in oil prices recently

The ISM index of activity in the non-manufacturing part of the US economy (which is by far the largest part) rose to 55.0 in December, well above the expansion-contraction level of 50 and more than offsetting on-going weakness in manufacturing

The outgoing Governor of the Bank of England, Mark Carney says “it’s generally true that there’s much less ammunition for all the major central banks than they previously had, and I’m of the opinion that this situation will persist for some time”, adding that “it’s not clear that monetary policy would have sufficient space” if it needs to combat anything worse than a “conventional recession.”

Data due today includes the European Commission’s Economic Sentiment Indicator for the Euro area while the ADP report on private sector employment is due in the US