What’s been happening? The pound ended the day in negative territory versus most of its peers yesterday, although it made notable gains versus the US dollar. December’s UK services PMI surprised with an above-forecast rise from 53.8 to 54.2, but markets weren’t too convinced that this was a positive sign. Like most services readings since the referendum, worries about the outlook for the sector took the shine off the positive headline reading, with markets still uncertain that the industry can escape negative impacts from Brexit and rising inflation. GBP/EUR further lost ground thanks to a slew of largely above-forecast PMIs for the Eurozone. Overall, the PMIs showed that the private sector expanded at its fastest pace in nearly seven years, and that the currency bloc economy was on track to have expanded by a respectable 0.8% in the fourth quarter of 2017. Meanwhile, GBP/USD was able to make solid gains, despite a run of positive US data that should have provided support for the US dollar. The ADP employment change report for December greatly bettered forecasts, rising unexpectedly from 190,000 to 250,000 – which markets will take to mean tomorrow’s non-farm payrolls figure is also likely to post a solid uptick in job creation. However, there were two things distracting the currency markets; the fact Federal Reserve policymakers still disagree on the inflation situation and the fact that the Dow Jones Industrial Average stock market index broke the 25,000 barrier for the first time in history. The former kept the outlook for US monetary policy soft, while the latter incentivised investors to take a risk on the stock markets rather than buying the safer, more stable US dollar. | 
