Good morning and welcome to today’s foreign exchange market commentary on Wednesday the 4th of January.
The New Year brought good news for global markets yesterday as PMI data from the US, UK and China showed expansion in manufacturing activities. Manufacturing has shown downward trend in most developed economies, hence some positive movement is good for investors’ confidence. UK manufacturing PMI was recorded at 49.6 for December from 47.3 in the previous month. Though any reading below 50 indicates contraction, and this is the 5th time in the last six months that manufacturing showed contraction, this certainly indicates some improvement over last month. However, a recession in the UK manufacturing sector looks more like a probability in Q4 now. News from the construction sector is due today and it is expected to stay above the 50 mark. The more important services sector PMI data is expected tomorrow and will be definitive for Q4 GDP result.
Meanwhile new orders, production and employment picked up on the other side of the Atlantic as US ISM data hit 53.9 for December from 52.7 in the past month. The expansion reinforces the notion that the US is unlikely to witness a double-dip recession in 2012 which remains a probability in Europe and Britain.
CURRENCY RATES OVERVIEW
GBP/EURO – 1.1975
GBP/US$ – 1.5631
GBP/CHF – 1.4618
GBP/CAN$ – 1.5851
GBP/AUS$ – 1.5095
GBP/ZAR – 12.6140
GBP/JPY – 119.97
GBP/HKD – 12.1671
GBP/NZD – 1.9820
GBP/SEK – 10.6684
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EUR: The common currency gained against the greenback yesterday though it struggled against the GBP and the antipodean currencies. The euro gained 1 pc against the dollar and exchanged hands at 1.3062 from 1.2934 the previous session. The euro however gained against the Japanese Yen and traded for 100.17 from 99.46 in the previous session. The market remains jittery on the euro and Germany’s success to sell €5 billion bunds will decide the currency’s movement going forward. The EUR/USD pair opened at 1.3040 before the German auction at 10am while the GBP/EUR pair sits at 1.1985 now.
USD: Positive economic data from the other side of the pond triggered a near sell-off of the Greenback yesterday as risk was back in favour. US private residential construction spending and ISM Manufacturing PMI data drove the GBP/USD pair to a high of 1.5670 yesterday. The FOMC minutes failed to have much of an impact and the market expects interest rate to remain unchanged in the medium-term. The GBP/USD pair opens at 1.5620 this morning.
Elsewhere, oil prices have witnessed volatility as the US and Iran lock horns over new sanctions and the subsequent threat by Iran to block the Hormuz Strait. The Iranian Riyal has slipped 40 pc over the past month as investors offloaded the currency in favour of others.
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Have a great day!
