Currency Note

Sterling still strong against euro and dollar

By Sharyh Murray-Francis January 24th, 2023

Sterling maintains gains against the euro and dollar.

Yesterday the pound continued to surge against the US dollar, making monthly gains of around 2.62% and weekly advances of around 1.48%. It is a similar story for GBP/EUR which maintains its weekly and monthly gains this morning.

Meanwhile, Britain’s recession fears continue to deepen according to new economic forecasts which came out yesterday. The UK’s leading economic forecasting group, the EY Item Club, said the economy will shrink 0.7% this year which is worse than the 0.3% they forecast in October. They also said that high inflation paired with the Bank of England’s rate hikes are major contributing factors.

Across the board, the latest purchasing managers’ index data will be released today, giving markets an idea on whether sectors such as services and manufacturing are expanding or declining. The first will be the eurozone’s manufacturing PMI at 9am and the last, will be the USA’s at 2:45 pm UK time.

The European Central Bank’s president Christine Lagarde spoke on Monday morning about inflation. Lagarde doubled down on the bank’s recent policy, warning that the ECB will continue raising interest rates quickly to slow soaring inflation. Investors seemed to be keen on Lagarde’s comments as EUR/USD rallied shortly afterwards on Monday.

In business news, Swedish music company, Spotify, says it will cut 6% of its 10,000 employees. The company, which is listed on the New York stock exchange, is expected to incur at least €35m (£30m) in severance-related charges.

Over in the US, recent economic data released from the country’s housing and manufacturing sectors, have suggested that the wider economy is facing rising headwinds.

As this week progresses, dollar watchers will have a slew of key data releases to digest which could all paint a similar picture. Those include mortgage rates, initial jobless claims, personal income and much more.

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GBP: All eyes on this morning’s CBI reports

Today markets will see the latest data from the confederation of British industry. Their businesses optimism index for Q1 will be released at 11am, in addition to industrial trends orders for January. Sterling-watchers will be observing closely to see whether these releases impact the pound’s movements over the coming days.

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EUR: Consumer confidence rose yesterday

EUR/USD climbed on Monday as investors continued to bet on ECB rate hikes.  As well as this, markets saw the latest consumer confidence reading for the eurozone rise by 1.1 points. The indicator climbed to -20.9 in January, its highest level since February 2022 .

This was largely driven by hopes that lower energy prices and recovery fund spending might help avoid a recession this year.

USD: Return of the S&P’s PMI data

Dollar-watchers have their work cut out for them this week as there are several releases which could move the dollar’s position against its rivals.

Today, the ones to watch come from the S&P who will be releasing three PMI data reports today. At 2:45pm UK time markets will see the flash readings for composite, services and manufacturing PMI

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