The pound opens 2020 on weak footing as Brexit jitters continue to weigh on sentiment.
Sterling remains on the defensive this morning, with GBP/EUR ticking down to €1.1737, GBP/USD retreating to $1.3096, and GBP/CAD tumbling to C$1.6975. GBP/AUD and GBP/NZD remain rangebound at AU$1.8838 and NZ$1.9659 respectively.
Looking ahead, will the release of the latest US manufacturing PMI cast the US dollar lower later this afternoon?
What’s been happening?
The pound was put on the defensive at the start of 2020 amid renewed Brexit jitters.
The UK is set to officially leave the EU at the end of January and it appears the realities are beginning to set in for some GBP investors.
Also dampening the appeal of the Sterling yesterday was the publication of the UK’s manufacturing PMI, which revealed growth in the UK factory sector suffered its second-worst contraction since 2012 in December.
In contrast the US dollar got off to a roaring start this year, recouping the majority of its losses from earlier in the week as it was swept up in a ‘New Year rally’ aided by China’s move to improve liquidity in the country.
The ‘greenback’ then extended these gains overnight as the US air strike in Iraq unnerved some investors and stoked safe-haven demand.
The broad strength of the US dollar stifled demand for the euro on Thursday, with the single currency left directionless in spite of the Eurozone’s manufacturing PMI being revised higher in December’s final reading.
What’s coming up?
Looking ahead, the US dollar will be in the spotlight today with the publication of the ISM manufacturing PMI.
This could cut the ‘greenback’ New Year rally short if growth in the US factory sector is shown to have contracted again in December as expected.
Also influencing USD exchange rates will be the publication of the FOMC minutes from the Federal Reserve’s December policy meeting.
USD investors will be looking for more clarity on the Fed’s policy plans for 2020 and the minutes could help counter any weakness in the US dollar if they reiterate the bank’s plans to keep rates on hold this year.
For EUR investors the focus will be on the publication of Germany’s consumer price index later this afternoon.
Expect the euro to strengthen if this shows German inflation accelerated last month.
Finally, the UK will publish its latest construction PMI today. Will another slump in construction sector activity exert some pressure on the pound this morning?
Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)