New Year, Same Themes

Currency markets remain focused on geopolitical risks as the new year begins with a slew of manufacturing data.

Previous Day's Market Highlights

Festive Season's Market Highlights

As expected, major pairings were confined to their well-established ranges for the majority of the festive period as low liquidity combined with a lack of economic data or news gave market participants little food for thought. Despite this, the dollar traded broadly weaker into the end of 2018 with the euro reaching its highest levels in 3 months against the greenback trading above $1.15. It was a similar story for the pound, which found some demand after comments suggesting the Brexit deal may pass through parliament with sterling strengthening by around 0.5%.
 
The only economic data of note was the monthly Swiss economic barometer, which declined for the third consecutive month. As a result, the economic outlook for 2019 has become more clouded with fears over slower growth coming to the fore. In addition, the ongoing US government shutdown caused a delay to home sales and trade balance data.
 
Other markets were more volatile, with US equity markets experiencing wild swings and posting their worst December since 1931 and their worst year since 2008. All major markets ended 2018 down by at least 3%, despite double-digit gains earlier in the year. It was also a torrid year for oil prices, with both Brent and WTI ending the year down by more than 15%, marking oil’s first yearly loss since 2015. This came after the fall in equity markets as well as a steep increase in supply and a softening of global demand.

In early trading this morning, the yen has reached a six month high against the dollar amid safe haven demand as Asian equity markets and US equity futures have dropped in their first trading sessions of the year.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1110 1.1267 1.1004 2.33%
GBP/USD 1.2749 1.2839 1.2476 2.83%
EUR/USD 1.1473 1.1485 1.1269 1.88%
GBP/AUD 1.8126 1.8190 1.7291 4.94%
GBP/NZD 1.8986 1.9025 1.8117 4.77%
GBP/CAD 1.7307 1.7392 1.6700 3.98%

Today's Market Highlights

The economic calendar is relatively quiet for the first trading day of 2019, with manufacturing PMI figures from the eurozone, UK and US set to be the focus of investors’ attention. While expectations are for all of the figures to show expansion in the industry, market participants are expecting the UK figure to decline by around 0.5 index points compared to November. A release below forecast for any of the economies could add to fears of a global slowdown in growth as the PMI surveys are one of the first monthly insights that market participants obtain into a country’s economic health.
 
The remainder of the week is also busy, with the main highlight being the US labour market report containing the non-farm payrolls figure on Friday. Market expectations are for around 180K jobs to have been added to the economy, with wage growth set to tick down to 3% on a year-over-year basis. With concerns over the impact of Federal reserve interest rate hikes on the US economy, the labour market report will be closely watched for any follow-through impact. Other highlights this week include employment figures from Canada as well as inflation estimates for the eurozone. Sterling traders will continue to focus on any Brexit-related headlines, with parliament set to return next Monday and the meaningful vote on the Brexit deal set to follow the week after.
 
Looking ahead to 2019 as a whole, geopolitics is set to remain firmly in the front of investors minds as Brexit and the US-China trade tensions look set to cause prolonged uncertainty, and therefore volatility, around the globe. In addition, with global central banks now well into a cycle of tightening monetary policy, concerns over a slowdown in global growth as well as the potential for central banks to hike rates too far are set to come to the fore.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:00am EUR Final Manufacturing PMI 51.4 51.4
9:30am GBP Manufacturing PMI 52.5 53.1
2:45pm USD Manufacturing PMI 53.9 53.9