European FX Outlook: UK industrial production set to rise on mining as manufacturing is seen falling

What you need to know before markets open:

• Rising commodity prices and reduced asset purchases by major central banks are set to support the case for higher bond yields, attracting investors away from equities.
• China’s factory gate inflation decelerates to the lowest in 13 months in December.

Wednesday’s market moving events

• China’s inflation rose 1.8% y/y in December while producers prices decelerated to 4.8% y/y.
• The UK manufacturing output is expected to fall -0.5% m/m in November while industrial production is seen rising 0.3% m/m on higher mining and quarrying.
• The UK trade balance with goods is expected to reach a deficit of £ 10.7 billion.
• The US export price index is seen rising 0.3% m/m in December.
• The US import price index is expected to rise 0.5% m/m in December.
• Canada’s building permits are seen falling -0.3% m/m in November.
• EIA crude oil inventories are expected to fall -4.1 million in the week ending January 5.
• Chicago Fed president Charles Evans is due to discuss current economic conditions or monetary policy at the Lake Forest-Lake Bluff Rotary Club 2018 Economic Breakfast in Lake Forest, Illinois at 14:00 GMT.
• The Bank of England Deputy Governor Ben Broadbent appears on BBC
• Radio 4's Money Box Live to answer questions on central bank policy at 15:00 GMT.
• St. Louis Fed president James Bullard is scheduled to give a presentation on the "U.S. Economy and Monetary Policy" at the 2018 Economic Outlook event in St. Louis at 18:30 GMT.

Major forex market movers

• The US Dollar Index rose 0.4% on Tuesday to the highest level in 2018 at 92.64 but loses against Japanese yen lowered its value on Wednesday.
• Traders are discounting the Bank of Japan move to cut the long-term asset purchases for the second day in a row with Yen rising to a 1-month high against US Dollar.
• Watch GBP/USD for knee-jerk reaction on UK manufacturing data.

Tuesday’s macro summary

• German industrial production rose massively by 3.4% m/m in November.
• German trade balance reached a surplus of €23.7 billion with exports rising 4.1% m/m and 8.2% y/y in November.
• French trade balance reached a deficit of €5.7 billion in November, coming in above expectations.
• The Eurozone unemployment rate dropped in line with expectations to 8.7% in November.
• The US NFIB small business optimism fell to 104.9, still one of the strongest readings in the 45-year history of the NFIB surveys. December.
• The US JOLTS jobs openings fell to 5.88 million in November.
• Minneapolis Federal Reserve Bank President Neel Kashkari said he views inflation as the main concern for monetary policy as it is going to continue to be too low. Kashkari wants to keep interest rates low to get wages rising and inflation back toward 2% target.