No New Years Joy for Sterling

4 January, 2017

Rob Bastin

As traders and the markets get back to normality, the New Year as so far failed to bring any now joy for the pound. The morning got off to a slightly better start with the first string of PMI data released for the UK. Manufacturing PMI surprisingly bounced back in the month of December, outperforming analysts forecasts of a slower growth figure of just 53, with a strong result of 56.1. The pound received some brief support on this news gaining around half a cent against the Euro and Dollar, but unfortunately these gains did not last the trading day with a reversal into the afternoon session that removed all the gains. The pound hit its lowest levels since October against the greenback that has started the New Year just at it finished the last and remains very much in pole position.

The US Dollar strength was further boosted in the afternoon following their own manufacturing figures, that also impressed the markets with ISM Manufacturing coming in at 54.7 against a forecast of 53.5. The announcement also briefly sent EUR/USD to its lowest level in 14 years as rates steadily creep lower towards parity, something that many predict could become a reality in 2017.

Today is another busy one as the new month brings the usual flurry of eco-stats for the market to absorb. UK PMI focus switches to Construction at 9:30am along with Novembers figure for Net Lending to Individuals. Euro-zone PMI focuses on Services and Inflation figures will follow at 10am. ADP employment change for the US is after lunch at 1:15pm, but more significantly the FOMC minutes are released this evening at 7pm. The markets currently expect 3 more rate hikes in 2017 from the Federal Reserve, will the minutes indicate anything different to this?