Christine Lagarde renews her pushback against market bets for an ECB rate hike in 2022. 

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U.K. house prices rose more than forecast in October, but Nationwide warns that a squeeze on living standards and rising interest rates are likely to cool the market. 

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The GBP/USD pair rose around 200 pips today due to positive data from the UK. The Office for National Statistics (ONS) said the number of people in work rose by 102,000 in the three months to November. This is the biggest increase since the period to July and taking total employment to a record 32.2 million. According to the ONS, workers’ earnings, excluding bonuses, rose by an annual 2.4 percent in the three months to November, the biggest increase since December 2016 and compared with 2.3 percent in the three months to October.
“Demand for workers remained strong”
Total pay growth, including bonuses, was unchanged at 2.5 percent, as expected. The Bank of England increased interest rates for the first time since 2007 in November as most of its policymakers thought the steep fall in unemployment would soon start to push up wages.“With the employment rate returning to a joint-record high and the number of vacancies setting a new record, demand for workers clearly remained strong,” ONS statistician David Freeman said.
The unemployment rate held at its four-decade low
Consumer price inflation for November hit it highest in almost six years at 3.1 percent. That left regular pay in real-terms down 0.5 percent on a year earlier in the three months to November.The data also showed the unemployment rate held at its four-decade low of 4.3 percent, as expected.The number of unemployment benefit claimants rose by 8,600 to 832,500 in December, lifting the proportion of the workforce claiming jobless benefits to 2.4 percent, the highest rate since February 2015.

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The EUR rose nearly 1.5% percent against the U.S. dollar today following the release of minutes from the last meeting of the ECB. Many analysts interpreted that the ECB could look to change its guidance to the markets. Some investors are now making calls that the euro zone's central bank could end its massive bond-buying program by the end of next year, with a potential rate increase in the fourth quarter.
Jens Weidmann, the ECB Governing Council member and Bundesbank Chairman, said that the full normalization of the monetary policy would be a long path.
German Social Democratic leaders appealed to party members on Friday to swallow their doubts and endorse an overnight deal to renew a “grand coalition” with Chancellor Angela Merkel’s conservatives for another four years.

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Bonds

The U.S. dollar fell today 0.6 percent against a basket of currencies for its biggest one-day drop in a month, after officials reviewing China's foreign-exchange holdings recommended slowing or halting purchases of U.S. Treasuries. The sources said the market for U.S. government bonds is becoming less attractive relative to other assets. The trade tensions with the United States is another reason to slow Treasury purchases, Bloomberg News reported today, citing people familiar with the matter.
Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen.

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The New Zealand government on Monday named pension fund chief Adrian Orr as the nation’s new central bank governor, sharply lifting the local dollar. The new chief will take up the role at the Reserve Bank of New Zealand (RBNZ) on March 27 and will play a crucial role in a key period of the central bank’s history, as the new Labour-led government plans to add maximizing employment to the bank’s objectives alongside its inflation target.
According to Dominick Stephens, chief economist at Westpac, markets welcomed Orr’s appointment, adding that he was unlikely to veer away dramatically from the inflation target.
Reserve Bank Chairman Professor Neil Quigley said that the Board is pleased to be able to recommend a candidate of Mr Orr's experience.
"He'll be able to tell a good story about how the Reserve Bank fits into what the government's trying to achieve, in that sense it's probably a political win for the government".

Finance Minister Grant Robertson said in the statement that the laws to change the bank’s mandate would likely not be in force by March, but the policy target agreement between him and Orr would be “developed in a manner consistent with the direction of reform.”

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U.S. stocks traded higher today as investor sentiment was boosted the Senate narrowly passing a major tax bill over the weekend. The Dow Jones industrial average rose 250 points, with JPMorgan Chase and Walt Disney leading advancers on the 30-stock index.
The S&P 500 gained 0.8 percent and reached an all-time high, with financials and telecommunications as the best-performing sectors.
The Wall Street Journal said that a deal by Disney to buy some of 21st Century Fox's assets is "gaining momentum". Disney shares rose 2.7 percent, and Fox shares gained 2.1 percent.
CVS Health also said it will buy Aetna, a U.S. health insurer, for $69 billion. The agreement is one of 2017's biggest deals so far in the merger and acquisition (M&A) space. CVS shares slipped 3.4 percent, while Aetna rose 1.7 percent.
In commodities, oil cartel OPEC and non-OPEC producing nation Russia agreed to limit their production output through to the end of next year. Oil prices are trading in the red Monday, following news that U.S. shale drillers had added more rigs in the previous week.

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Canadian economic growth slowed to 1.7 percent in the third quarter, but an acceleration in hiring and wage growth last month was seen giving the central bank reason to raise interest rates again before long.
The lowest unemployment rate since 2008
The economy added 79,500 jobs in November, Statistics Canada said on Friday, blowing past expectations for a gain of 10,000 and sending the unemployment rate to 5.9 percent, its lowest since February 2008.
The 1.7 percent was slightly higher than the 1.6 percent forecast by economists. The second quarter rate was downwardly revised to 4.3 percent from the previously reported 4.5 percent.
Exports, the main drag on the economy
The economy grew 0.2 percent in September, topping expectations and suggesting modest momentum heading into the fourth quarter. The housing sector also weighed on growth, with investment in residential structures down 1.4 percent as ownership transfer costs fell, reflecting slower resale activity. However, exports were the main drag on the economy in the third quarter, falling by 10.2 percent on an annualized basis as shipments of vehicles and parts fell amid work stoppages and changes to certain models sent to the U.S. market. Business investment in non-residential structures, machinery and equipment grew by 3.7 percent, slowing substantially from the second quarter.

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European stocks edged higher today, as investors focused on earnings reports. The German DAX was rallying 1.7 percent, France's CAC 40 index was rising half a percent and the U.K.'s FTSE 100 was rising 0.2 percent.
German automakers were up around 2 percent
German automakers as BMW, Daimler and Volkswagen were up around 2 percent each before publishing their U.S. car sales figures for October.
Bayer advanced 1.3 percent amid reports that the German pharmaceutical firm and Novartis are threatening legal action against twelve clinical commissioning groups in the north of England for plans to offer patients a cheap eye drug. Novartis shares also rose over 1 percent.
Finnish tyre maker Nokian Tyres rallied 3 percent after its quarterly profit topped forecasts.
Technology stocks also jumped
The pan-European Stoxx 600 was 0.6 percent higher with almost all sectors trading in positive territory.
Basic resources stocks were the top performing sector, up by 2.2 percent, following positive manufacturing data released in China.
Autos rose above 1.5 percent, driven by earnings. Nokian posted sales and operating profit above expectations for its third quarter, which sent the tyre maker up by 4 percent.
Technology stocks also jumped boosted by earnings. Shares of Sony reached a nine-year high Wednesday during Asian trade after beating earnings forecasts.
Standard Chartered more than doubled its net profits in the third quarter of the year. However, shares dropped 5 percent, as investors raised concerns over its recovery plan.
The pharmaceutical firm Indivior rose to the top of the European benchmark, up by more than 10 percent, after receiving approval for a new drug for opioid addiction treatment.

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