The New Year may have begun in fact, but in practice, full participation may return only after the release of US employment data on January 5.  The macroeconomic and policy tables have been set, though interpolating from the Overnight Index Swaps market, there is 45% chance the Bank of Canada hikes rates at its policy meeting near the middle of the month.

In the currency markets, sentiment appears to be as uniformly dollar negative as it had been positive a year ago.  More important for the near-term price action, there have been powerful but extended trends over the past two-three weeks as participation thinned.Consider that the Canadian dollar appreciated nine of the past 10 sessions.The Australian dollar rose in 13 of the last 15 sessions.

It is too difficult to find a consistent narrative of what the market is saying.  The rally in industrial metals and equities suggest an economically optimistic outlook.However, the rally in the US Treasuries and the flattening yield curves in most advanced economies would seem to be consistent with downside risks.There is no sign in recent data that the synchronized upturn is slowing.In fact, on balance, data from Q4 suggests, growth may have accelerated. 

The flash PMI for the eurozone is expected to be confirmed in the coming days.  The composite firmed to a new cyclical high 58.0 from 57.5 in November. It averaged 56.0 in Q3. The composite PMI was at 54.4 at the end of 2016. Not only has economic activity quickened but it also broadened.Italy and France, and no less than Greece are participating. 

Data over the last couple of weeks suggests that what might have begun as an export-led growth in industrial output and capital investment has spread to consumption.Overall household spending rose 1.7% year-over-year in November. This is the second strongest pace in more than two years. 

China, the world’s second-largest economy, is also finishing the year on a firm note. The official manufacturing PMI slipped to 51.6 in December from 51.8 in November. The Q4 average was 51.7 after 51.8 in Q3 and 51.5 in H1.The non-manufacturing PMI edged up to 55.0 from 54.8.It averaged 54.7 in Q4 and 54.4 in Q3, following a 54.5 average in H1.  

Of the large countries, India’s economy may be the most concerning. After a good H1 2017, the economy struggled in Q3. The composite PMI posted the year’s high of 51.7 in June before falling below the 50 boom/bust level in July and August. The recovery in September and October (51.3) fizzled out in November (50.3). The December reading is due January 4.