– “[Pound Sterling] GBP unwinds late-year strength, edges toward 40DMA” Scotiabank
– “[Euro] EUR looks past key macro data, falls below 200DMA”
– The Pound-to-Euro exchange rate was quoted at €1.17472 on 03.01.2020
– The Pound-to-Dollar exchange rate was quoted at $1.31098 on 03.01.2020
Pound Sterling (GBP) Exchange Rates
The British Pound exchange rates caught a slight bid overnight after a rough day of trade on Thursday which saw the Pound to Dollar exchange rate (GBP/USD) scythe back through 1.32 level with a roughly 100 pip loss.
Despite Cable’s losses, the winds are blowing in the direction of a “friendly” Brexit, as numerous headlines demonstrate the desire on both sides for a rapid and appropriate deal to limit the damage on both sides.
Another bad UK PMI (manufacturing this time) continues to show the economy is barely ticking over and a rate hike remains a long way off.
Boris Johnson is keeping his relentless optimism going, but as today shows, the GBP remains as sensitive as any G10 currency, with negative headlines landing like a ton of bricks.
Euro (EUR) Exchange Rates
The Euro exchange rates also slid lower on Thursday, dropping through $1.12 despite a better than expected German and Eurozone manufacturing PMI. Outperforming the Pound, the Euro did not find too much buying appetite on a strong day for European equities.
US Dollar (USD) Exchange Rates
With US stock markets surging ever higher, the US dollar could not help but get caught up in the party as it rallied strongly on Thursday after a few days of weakness heading into the new year.
Some weakness did emerge overnight, but another set of strong jobs numbers and weak manufacturing data shows that the course of the economy remains the same, and the Federal Reserve is firmly on hold and the greenback is very steady.
Kathy Lien at BK Asset Management noted in a recent report that the USD often performs very well in election years (the US election is set for November) which by association also puts the recent rally in the Euro at risk in 2020,
“Historically, the US dollar tends to perform well in election years. In the last 4 decades, the dollar index has only depreciated during 2 election years and the sell-off in 2012 was nominal. During this same time, we see a strong pattern for the euro, which fell in 9 out of the last 11 election years. So while history does not always repeat itself, based on past performance, there’s a good chance that 2020 will be another good year for the greenback.”
OTHER MAJORS
Risk sentiment was knocked overnight as it appeared that US airstrikes may have killed an elite Iranian General near Baghdad.
Crude oil spiked, gold prices moved higher and the Japanese Yen rose as markets awaited what will surely elicit a response from Iran.
The Australian Dollar also suffered falling 0.21% as US stock futures slipped.
THE DAY AHEAD
While today will probably be shaped by the escalating tensions between the US and Iran there is plenty of high profile economic data.
In Europe, there is a construction PMI in the UK and German unemployment change is released alongside its CPI.
Later on, ISM manufacturing is also on tap in the US as well as crude oil inventories, on what could be a volatile day for Crude oil with the burgeoning tensions in the Middle East.
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