FX Market Overview In a quiet day on the foreign exchanges the Euro was the largest beneficiary as it rose on the back of better than expected consumer confidence data. The flash estimate rose to -5.7 versus an expectation of -5.85 and consumer sentiment as a whole increased to -3.7. In thin trading conditions, the single currency made significant gains as traders looked to square their books ahead of the festive season. The Pound is continuing to lose ground and has depreciated almost 5% versus the Euro as expectations for a rate hike from the Bank of England recede. Rates markets now anticipate that we will remain on hold throughout 2016 with the first move not expected until February 2017. The increased chances of a Brexit have added to the Pound's woes and it looks like Sterling will struggle to maintain any rallies in the early part of the New Year. After the Federal Reserve finally raised interest rates last week, most analysts had expected a surge in the dollar to begin before year end. The market seems to be discounting the idea that rates will be hiked by 100 bps next year as per the FOMC dot path. Of course the Fed made it clear that the path of rate rises would be gradual and data dependent which should mean that the dollar will start to see some support over the course of next year as traders begin to price in a hike in the first quarter. Third quarter GDP is the focus this afternoon and even if it is revised slightly lower as expected is likely to have little effect on range bound holiday markets.

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