In a week marked by the complete absence of economic or policy news out of the UK, Sterling tracked almost tick by tick the moves of the Euro versus the US Dollar to end down a bit over 1% against both major currencies.
The Eurozone also had an extremely quiet week in terms of economic releases. Spain and Italy received an economic recovery boost, Spanish shops are now hiring at pre-crisis levels, while business confidence is also holding up in Italy, according to official figures.
Spain's national statistics agency said retail hiring in November grew 1.8% on last year, the fastest rate since Spain entered a deep recession in 2008. In Italy, figures showed business confidence fell in December, but remained close to recent highs. Italy and Spain are the Eurozone’s third and fourth largest economies.
Spanish retail sales increased 3.3% in November compared to last year, the sixteenth consecutive month of growth, according to the National Statistics Institute. Many retailers are confident this will be the best Christmas period for business since the country's recovery started.
Higher household spending in Spain this year, fuelled by falling oil prices and tax cuts, has helped to boost Spanish shops and drive economic growth. Spain's economy grew 0.8% in the third quarter, while the growth rate in Italy was lower than expected at 0.2%, according to EU figures.
Despite the slowdown, morale among Italian businesses and consumers remains high. Business confidence fell to 105.8 from 107.1 in November, according to Italian statistic agency ISTAT's composite business morale index, which combines surveys of the manufacturing, retail, construction and services sectors. Consumer confidence dropped to 117.6 from a record high of 118.4 in November, although it was still above analyst expectations.
Greek Prime Minister Alexis Tsipras said he will not give in to “unreasonable” demands as he braces for negotiations with creditors over pension cuts. Tsipras is aiming to pass the bill through parliament by January 15.
The pension reforms form part of an €86bn (£63bn) bailout package agreed to in August, of which €16bn has been unlocked so far. Tsipras faces a tough challenge in satisfying creditors without angering voters and his MPs, who command a small majority in parliament.
Greek central bank boss Yannis Stournaras warned that failure to reach an agreement “entails large risks, difficult for the economy to withstand this time.”
In the US, the Conference Board Consumer Confidence Index, which had decreased moderately in November, improved in December. The Index now stands at 96.5, up from 92.6 in November.
Pending home sales in November slightly declined for the third time in four months as buyers continue to battle both rising home prices and limited homes available for sale. Pending home sales index inched down by a seasonally adjusted 0.9% last month. Year-on-year, pending home sales rose at annualized rate of 5.1% in November. This was above forecasts for an increase of 4.0% and following a gain of 2.3% in the prior month. The dollar held steady against the euro due to the upbeat data release.
The pound was almost unchanged against the U.S. dollar, hovering close to an eight-month low. The Nationwide Building Society said home prices rose 0.8% in December, exceeding expectations for a 0.5% gain.
International Monetary Fund chief Christine Lagarde warned that global economic growth would be "disappointing" next year. Writing in a guest article for German newspaper Handelsblatt, Lagarde pointed to the possible effects a slowdown in emerging economies would have on the rest of the world. Lagarde said "In many countries the financial sector still has weaknesses and in emerging markets the financial risks are increasing. All of that means global growth will be disappointing and uneven in 2016," Lagarde also said growth in global trade has slowed considerably while a decline in raw material prices is also providing a drag on economies and that low productivity, ageing populations and the effects of the global financial crisis will also stall growth.