Currency Note

Strong services data helps pound

By Christopher Nye January 7th, 2020

pound data

The pound had a boost yesterday from strong services data, as the figure showed the sector coming out of contraction. Today, MPs will return to Parliament after their Christmas break.

Data from the eurozone also showed continued growth in investor confidence, in a positive sign for the single currency. Today, sales figures look to be coming in positively, too.

The dollar drifted downward yesterday; investors are still wary as the uncertainty around the situation with Iran unfolds, following the killing of Iranian General Qasem Soleimani. However, the greenback is stronger this morning.

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GBP: Pound stronger on positive data

The pound strengthened yesterday on the back of positive Services PMI data, which was revised higher to 50, bringing the figure out of contraction territory. The boost also occurred as investors returned to sterling after opting for safe-haven currencies due to the tensions between the US and Iran.

Composite PMI was also revised higher yesterday to 52.7, pointing to the strongest growth in private sector activity in eight months.

Today, MPs will return to Parliament after their Christmas break. The Brexit Withdrawal Bill will be debated, which includes a clause to rule out any extension to the Brexit transition deadline at the end of December this year.

Following the killing of Iranian General Qasem Soleimani, Downing Street has urged Iraq to allow UK troops to stay in the country. European leaders have called for all sides to show restraint.

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EUR: Eurozone investor confidence hits year-high

Although the euro weakened slightly against the pound yesterday, investors are still feeling positive about its prospects, with confidence reaching a more-than-twelve-month high after three months of growth. That said, the figure is not astronomically high in itself, at 7.6, so it doesn’t mean that anything is ironclad.

Today, retail sales figures for the eurozone will be released, and it will be interesting to see the impact of the festive period. Figures are expected to re-enter positive territory, after a disappointing month previously.

The ECB seems set to continue current measures for the foreseeable future, with Philip Lane saying yesterday that, although ‘we remain satisfied that the basic mechanics of monetary policy still operate’, inflation measures are ‘still too low’.

USD: Dollar stronger as Iran crisis develops

The dollar was weaker against the pound and the euro yesterday, but is stronger this morning as Iran designated the US military a terrorist organisation. Iran has also said that it is considering up to 13 retaliation scenarios.

Both Services and Composite PMI’s were revised higher for the US, with Services PMI reaching a five-month high. Employment and new orders rose the most since July, with new business from abroad posting the first increase in five months.

Today, we’ll see a series of data released include Balance of Trade and Non-Manufacturing figures.

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