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The euro faced more pressure to begin the week
There was no respite for the euro yesterday, as the single currency continued to stumble against the pound and the US dollar. GBP/EUR remains in touching distance of recent highs, while the US dollar surged by 1.1% and 0.9% respectively against the euro and sterling on Monday.
The US dollar is now trading at its highest level since last year against the pound, while USD/EUR climbed to its highest in almost three months.
Do currency markets watch Sunday TV? Well, European accounts could perhaps be excused for not watching American broadcasts, but had they done so, they would have seen Federal Reserve chair Jerome Powell on CBS’s prime-time show 60 Minutes.
Sporting his most pulsating navy suit, Powell pushed back on claims that he would cut interest rates soon. In fact, Powell said his current expectation was for only three batches of cuts in 2024, fewer than had previously been expected.
Whether they had watched it or not, markets soon caught wind of Powell’s comments and the dollar duly surged. On a data-light day, the arrival of ISM Services PMI from the US added more fuel to the fire as it was revealed the index had increased by more than expected, from 50.5 in December to 53.4 in January.
The UK did report a better than expected final outcome in the S&P Global Services and composite PMI metrics. January’s services figure was revised upwards from 53.8 to 54.3, reflecting a positive sign of expansion in the UK’s key services sector.
Over in Europe, the HCOB PMI results were something of a mixed bag. There was a dip for the eurozone-wide and German surveys, but an increase in Italy and Spain. Taken together, it’s probable that these figures do little to move the needle on when the European Central Bank looks to cut interest rates.
It’s another relatively quiet day on the macroeconomic front today, but it’s a brave person who discounts any unexpected events from impacting currency markets.
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GBP: Services stay strong
Sterling advanced by around a quarter of a per cent against the euro while falling back against the US dollar.
As we predicted might be the case yesterday, the UK’s services sector reported an expansion in January’s final S&P Global PMI survey. That figure ended at 54.3, a full point up from preliminary reports and a promising sign for the dominant services sector.
GBP/USD: the past year
EUR: German surplus
The euro continued to lose ground to its main rivals at the start of the new week.
Just like the month before, the German trade surplus (i.e. exports minus inmports) widened in December. The balance of trade had been expected to sit around €17bn, so the final figure of €22bn caused a few raised eyebrows on the continent.
GBP/EUR: the past year
USD: ISM sharpens minds
The US dollar made large gains over the pound and the euro in Monday’s session.
It wasn’t just Jerome Powell that helped the dollar strengthen, but also improved ISM Services PMI. All signs now seem to point to a “higher for longer” outlook on interest rates than many had assumed.
USD/EUR: the past year
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