Yesterday started well for sterling as the Service Purchasing Managers Index (PMI) for November met expectations. This was in stark contrast to the PMI’s for Manufacturing and Construction which had disappointed earlier in the week.
Then sterling went into freefall against the euro as the European Central Bank (ECB) increased their programme of quantitative easing at the lower end of expectations. Speculators who dominate the currency markets were, it seems, caught out and in their desperation to close out their positions caused sterling to weaken significantly against the euro, losing over three cents in a very short period of time early afternoon. The reverse happened for sterling against the US dollar which saw sterling gain over one and half cents.
So what can we expect today? Difficult to say. Very little UK data out and limited data from the Eurozone. In the US we have the release of the key Non-farm payroll figures which are seen as the last piece of key data required, if positive against expectations, to support an increase in US interest rates in December.
And we have to remember that over the last few months we have seen significant movement for sterling. Especially against the euro which has oscillated between highs and lows of 1.43 and 1.33 against sterling.