The pound suffered increased volatility yesterday, weakening in the early hours of the day’s trading before regaining ground in the afternoon, only to finish the day down across the board. Against the dollar the pound lost nearly half a percent and against the euro it was down 0.15%. A poor services PMI number failed to provide the currency with any support as did uncertainty surrounding the UKs agreement with the EU.
A lack of economic data releases today is likely to leave the pound vulnerable to wider market pressures, however with investors so sensitive to any Brexit news, any comments regarding the timing or contents of the rumoured Brexit agreement could see a strong sterling reaction.
The euro posted a mixed performance yesterday, gaining marginally against the pound but losing over 0.3% against the dollar. A positive batch of services PMI data from Germany and France provided the currency with some initial support, however with focus on the UK Brexit deal as well as continuing uncertainty in the US the currency was largely driven by wider movements.
This morning we have had the release of German industrial orders which surprised investors, falling 0.8% less than expected, down to +0.5% (-0.3% predicted). Off of the back of this the currency has gained some ground this morning, however in a similar vein to yesterday the currency is likely to be driven by wider focus.
The greenback performed well yesterday, gaining nearly half a percent against the pound and a third of a percent against the euro. This strong performance came despite a larger than expected fall in non-manufacturing PMI numbers, which were predicted to fall 1.1 to 59, but ended up down 2.7 points to 57.4. Despite this poor data and ongoing uncertainty surrounding a potential government shutdown, positive sentiment and wider market uncertainty allowed the currency to stretch its legs.
Today we have the release of ADP employment and labour cost data which both look set to fall from prior which may see some greenback uncertainty. Despite this data, if any news of the proposed tax reform surfaces we could see some further dollar strength.
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