US politicians have finally managed to achieve the achievable. Yesterday, at long last, a deal was finally reached and passed in both houses that has prevented the fiscal cliff from being hit head on. After weeks of negotiations and impasse, a deal was finally reached that will raise taxes on the wealthy whilst maintaining lower tax levels for over 99% of Americans (those earning under $400,000) and delay government spending cuts for a further two months.

As the January 1st deadline came and went, fears began to grow that a deal might not actually be done. However, only a short time later, US politicians had managed to reach an agreement, and the importance of which was reflected nowhere more clearly than in the markets themselves. The global economy, as well as the US, would have been hit hard had the dangers of the fiscal cliff not been averted and the relief was clear to see across the world this morning as first Asian stocks, then European stocks, opened up.

The deal regarding the fiscal cliff has also resulted in a decrease in risk aversion and consequently a fall in safe haven demand. This has led to the Dollar weakening against the majority of its counterparts today as EUR/USD hit 1.3299 in the early hours of this morning and is currently trading at 1.3263. However, the most significant move was seen in GBP/USD which reached a high 1.6381 this morning and is currently trading at 1.6315. After hitting a key level of support at 1.6309 for the second time in two weeks, Cable has now broken above this level and could look to push onto the next level of key resistance at 1.64, the real test though will be whether the pair can consistently trade above 1.63.

GBP/EUR saw a sharp spike up to 1.2318 this morning following the release of Markit Manufacturing PMI figures. The UK substantially beat market expectations of 49.1, recording a figure of 51.4, compared to an EU Markit Manufacturing PMI figure of 46.1 which was down from last month and also short of market expectations. There is little more economic data due out this morning with the next significant releases coming this afternoon when we will see German Consumer Price Index and US PMI figures being released.

Please find a summary of this week’s economic calendar below:

08:53 German Markit Manufacturing PMI
08:58 EU Markit Manufacturing PMI
09:28 UK Markit Manufacturing PMI
13:00 German Consumer Price Index
13:00 German Harmonised Index of Consumer Prices
15:00 US Construction Spending
15:00 US ISM Manufacturing PMI

07:00 UK Nationwide Housing Prices
08:55 German Unemployment Change
09:30 UK PMI Construction
13:30 US Initial Jobless Claim
13:30 US FOMC Minutes

07:00 German Retail Sales
08:58 EU Markit Services PMI
09:28 UK Markit Services PMI
09:30 UK Consumer Credit
09:30 UK Mortgage Approvals
10:00 EU Consumer Price Index
13:30 US Average Hourly Earnings
13:30 US Nonfarm Payrolls
13:30 US Unemployment Rate
15:00 US Factory Orders
15:00 US ISM Non-Manufacturing PMI