Strong US jobs growth

Equity markets rallied on Friday on a combination of policy easing by China’s central bank, strong jobs data in the US, and some reassuring comments from the Chair of the Fed. Core bond yields rose as stocks pushed ahead, while the dollar lost some ground to the euro and sterling and trades at just under $1.1450 and $1.2750 respectively this morning

China’s central bank took steps to inject liquidity into the system (cutting banks’ required reserves ratio by 1 percentage point), while employment in the US rose by a much greater than expected 312,000 in December (the largest gain since last February) to end 2018 on a strong note.  The Fed Chair Powell said the US economy is entering 2019 with good momentum but also added that, with inflation well-behaved, the Fed can be patient in raising interest rates as it waits to see how the economy evolves as we move through the year

Sterling is a little firmer against the euro (at around 89.75p) at the start of a week that will see a Brexit debate in the UK parliament ahead of a vote on Theresa May’s deal with the EU next week (it looks like it will be Tuesday). The PM has again reiterated that failure to pass the deal risks a no deal Brexit or no Brexit, while saying that she is continuing to seek reassurances from the EU on aspects of the deal ahead of the vote

The annual rate of headline inflation in the Euro area fell again in December according to the flash reading, to 1.6% from 1.9% in November, reflecting the impact of lower oil prices recently

Looking to the week ahead, data to be published includes the ISM index of non-manufacturing activity in the US today and CPI on Friday, while the minutes of the Fed’s December meeting are released on Wednesday. In the Euro area, the European Commission’s Economic Sentiment Indicator for the Euro area is due on Wednesday, while  UK GDP for November is out on Friday