Mixed activity indicators to keep downward pressure on sterling

Likely mixed December PMIs will be the focus for GBP this week and include manufacturing (Monday; consensus: 52.8; last: 52.7), construction (Tuesday; consensus: 56.0; last: 55.3) and services (Wednesday: consensus: 55.6; last: 55.9). 

The GBP was one of the poorest performers versus the USD over the holiday period, and it will continue to weaken in the coming months as the market concentrates on UK-specific 2016 downside risks, including aggressive fiscal tightening and the impending EU referendum. 

The Autumn Statement revealed a slight moderation in the degree of planned fiscal tightening this year, but it should still prove a significant detractor from growth, a view shared by an increasingly dovish Bank of England amid extremely low price pressures.