The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Sterling continues to retreat this morning, with GBP/EUR dipping to €1.1724, GBP/USD sinking to $1.2957, and GBP/CAD sliding to C$1.7209. GBP/AUD and GBP/NZD have tumbled to AU$1.9287 and NZ$2.0043 respectively.
Will today’s UK’s construction PMI help the pound claw back some of its losses following an improvement in activity last month?
What’s been happening?
The pound plummeted at the start this week, giving up all of its post Bank of England (BoE) gains from last week amid renewed fears the UK could be headed for a no-deal Brexit later in the year.
These fears were stoked by a speech from Boris Johnson outlining his vision for a post-Brexit trade deal with the EU.
Johnson sought to strike a tough stance on future negotiations, stating he will attempt to secure a Free Trade Agreement (FTA) but would not accept EU rules as he isn’t afraid to walk away from talks if such a deal is not offered.
At the same time, the EU’s chief Brexit negotiator Michel Barnier has warned that any FTA would undoubtedly require some alignment between the UK and EU to ensure a ‘level playing field’.
The euro also suffered from some Brexit related jitters on Monday, with the single currency softening amid concerns of how a no-deal Brexit could damage the Eurozone economy.
Meanwhile, the US dollar roared higher yesterday as USD investors cheered the release of the latest ISM manufacturing PMI after the US factory sector unexpectedly returned to growth last month.
This uptrend in the ‘greenback’ was further supported by ongoing concerns over the coronavirus, which continued to drive demand for the safe-haven currency.
What’s coming up?
On the docket today is the publication of the UK’s latest construction PMI.
This is expected to show that the recent contraction in the construction sector narrowed last month, potentially offering the pound some support this morning.
For USD investors the focus will be on the latest US factory order figures, where a rebound in order growth in December may help the US dollar extend its gains later this afternoon.
Finally, in the absence of any notable Eurozone data, the euro may struggle to find momentum today, with EUR investors looking to tomorrow’s retail sales figures for fresh impetus.
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)