Risk appetite remained fragile as Middle East tensions dominated markets.
Equities retreated, although index losses were measured as energy and gold stocks made gains.
The dollar was hampered by a weak ISM manufacturing release while Fed minutes were broadly neutral. European currencies recovered from Friday’s lows with slight net gains for the dollar index.
USD/JPY declined to 3-month lows amid lower US yields and defensive yen demand before correcting.
The US currency dipped again following the weaker than expected ISM data as US 10-year yields dipped to 1-month lows and underlying demand for defensive assets remained firm. US equities drifted lower into the US close, although USD/JPY held just above 108.00.
Over the weekend, Iran announced that it was withdrawing from all nuclear deal commitments, further increasing underlying tensions while the new Iranian Quds military commander vowed to remove the US from Iran.
The Australian dollar lost traction, although the Canadian dollar was supported by high oil prices.
Precious metals continued to draw support from Middle East tensions with gold advancing to 6-year highs on Monday.
The UK December construction PMI index declined to 44.4 from 45.3 previously. The figure was below expectations of 45.9 and the eighth successive reading below the benchmark 50.0 level. Activity declined across all sectors with commercial activity registering the sharpest decline since March 2009. Political uncertainty was a key negative factor and developments in early 2020 will be monitored closely.
Sterling retreated after the data and weaker global risk conditions were also a factor undermining sentiment. GBP/USD retreated to near 1.3050 in early US trading before a tentative recovery.
Political developments will be monitored in the week ahead as the House of Commons returns from recess. The Brexit Bill will be debated with developments surrounding the implementation period important. Sterling was little changed on Monday and GBP/USD remained below 1.3100 amid fragile global risk trends with EUR/GBP holding net gains to the 0.8530 area.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 07:00 | EUR German Retail Sales (M/M)(NOV, 2019) | 1.00% | -1.90% |
| 07:00 | EUR German Retail Sales (Y/Y)(NOV, 2019) | 0.90% | 0.80% |
| 08:45 | Markit/ADACI Svcs PMI(DEC, 2019) | - | 50.4 |
| 08:50 | Markit Serv PMI(DEC, 2019) | 52.4 | 52.2 |
| 08:55 | EUR German PMI Composite(DEC, 2019) | 49.40 | 49.4 |
| 08:55 | EUR German PMI Services(DEC, 2019) | 52 | 52 |
| 09:00 | Euro-Zone PMI Composite(DEC, 2019) | 50.60 | 50.6 |
| 09:00 | Euro-Zone PMI Services(DEC, 2019) | 52.40 | 52.4 |
| 09:30 | GBP PMI Services(DEC, 2019) | 49.2 | 49 |
| 09:30 | Euro-Zone Sentix Investor Confidence(JAN) | -4.9 | 0.7 |
| 10:00 | Euro-Zone PPI (Y/Y)(NOV, 2019) | -1.90% | -1.90% |
| 10:00 | Euro-Zone PPI (M/M)(NOV, 2019) | - | 0.10% |
| 13:30 | CAD RMPI (M/M)(NOV, 2019) | - | -1.90% |
| 14:45 | USD Markit PMI Composite(DEC, 2019) | - | 52.2 |
| 14:45 | USD Markit Services PMI(DEC, 2019) | - | 52.2 |