Brexit negotiation hopes nudge GBP higher on New Year’s Day

Yesterday was unsurprisingly a quiet day for both economic data and movement on the currency markets.

The pound is on weak form this morning ahead of key manufacturing data from December. GBP/EUR is just below opening levels at €1.1242, although GBP/USD has climbed 0.2% to US$1.3532. GBP/AUD slumped -0.4% to A$1.7259, GBP/NZD has dropped -0.3% to NZ$1.9000, and GBP/CAD is stuck just under opening levels at C$1.6955.

The economic calendar is all about manufacturing data today. Read on to see why the pound may not be too bothered by the UK’s PMI, despite forecasts of a slight drop…

What’s been happening?

With many markets closed for the New Year and traders absent from their desks, GBP/EUR and GBP/USD exchange rates saw only minor fluctuations yesterday.

The economic calendar was as empty as the trading floors, with no data published for the UK, Eurozone, or United States.

Overall, Sterling managed to inch higher versus the euro and US dollar – probably the result of automatic trading orders being triggered as the exchange rates crept higher or lower.

On top of this, the outlook for pound Sterling in the short term is more favourable than that of the euro or US dollar.

Sterling has recently received a boost from the fact that Brexit negotiations have finally been allowed to move on to the issue of trade.

Meanwhile, the euro is weakened by the prospect of imminent Italian general elections and German Chancellor Angela Merkel’s tenuous grip on power.

On top of that, the US dollar has to contend with dwindling market expectations for tax reform, as markets again begin to wonder if President Donald Trump will actually implement his plans, and if they will deliver on the benefits promised or simply blow a hole in the national deficit.

What's coming up?

There is a respectable amount to date on the economic calendar today, considering it is only the 2nd January.

The Eurozone Manufacturing PMI’s on offer are only finalised versions of previous releases, but they still hold the potential to create volatility for the euro if they unexpectedly revised higher or lower.

Next up will be the December manufacturing PMI for the UK. This is predicted to inch down slightly, although still remain on strong form with a respectable score of 57.9.

The US manufacturing PMI is also released today, and like the Eurozone figures is expected to simply confirm the findings of previous estimates.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.