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A strong day for the US dollar tempered a bad day for Wall Street.
The US dollar began 2024 on the front foot, gaining almost a cent against the euro and the pound in the first session of the year.
While the GBP/EUR exchange rate remained largely unchanged yesterday, sterling plummeted against the US dollar, losing three-quarters of a per cent following downbeat UK factory data. EUR/USD also fell back as markets became less confident the Federal Reserve was on course for rate cuts as early as March.
The UK’s S&P Global manufacturing PMI for December came in at 46.2, lower than expectations and below November’s 46.4. The data has now hovered below 50 for 17 months in a row, indicating contraction within the sector.
The German and Italian HCOB manufacturing indexes improved in December to 43.3 and 45.3 respectively, however, a concurrent dip for the Spanish and French metrics will give the European Central Bank (ECB) food for thought.
It was a pretty light day for macro data yesterday, but things change quickly in currency markets. German unemployment figures due today are expected to have risen slightly by 20,000 to 2.73mn in December, a slightly smaller rise compared to November.
Markets will also be keeping a close eye on the ISM manufacturing index out of the US. Sentiment in December is anticipated to have improved slightly, up to 47.3 from last month’s 46.7. That’s still below the 50 that represents a neutral read in the composite.
China’s BYD has overtaken Tesla in electric car sales for the first time. That came as the second part of a double-whammy of bad news for Elon Musk after it was revealed X’s valuation had fallen by over 70% after the takeover and rebranding from Twitter.
Hamas’s deputy political leader Saleh al-Arouri has been killed in an explosion at one of the group’s offices in Beirut, an attack that Lebanon blamed on an Israeli drone strike. His death is likely to heighten tensions across the reason and potentially put Hizbollah on a collision course with Israel.
The tech-heavy Nasdaq index got off to a rotten start to the year. The index was weighed down by a cautious tone, with Apple and chipmakers among the biggest fallers.
Almost one quarter of UK buy now, pay later (BNPL) users have been stung by late repayment fees according to new research. The credit product has become increasingly popular amid the sharp cost-of-living rise, but experts have warned it could lead to higher indebtedness, especially among younger people.
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GBP: 17 consecutive months of contraction
Sterling fell by three quarters of a per cent against the US dollar yesterday while treading water against the euro.
The UK economy reached another unwanted milestone yesterday, marking 17 months in a row the S&P Manufacturing PMI has sat in negative territory.
GBP/USD: the past year
EUR: Mixed manufacturing messages
EUR/USD fell by just under 1% yesterday, as the US dollar benefitted from altered interest rate expectations.
It was a mixed day for the eurozone owing largely to a conflicting set of data from the manufacturing sector. The HCOB index increased in Germany, undoubtedly the key region, but falls for France and Spain highlighting the precarious economic situation.
USD: ISM and JOLTs
The US dollar jumped up against its major rivals yesterday, buoyed by the possibility of interest rates being kept higher for longer.
Two big macro reads are due today – the ISM manufacturing index and JOLTs job openings. Both metrics are expected to stay in the same ballpark, but any larger swings could lead to volatility in dollar markets.
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