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Britain’s Economic Outlook Continues to Worsen, RBA Less Dovish than Expected

Pound News: UK Services Sector Near-Stagnant According to PMI Report

Market appetite for the Pound lightened further yesterday as investors digested the latest UK services PMI report from Markit. The data indicated that Britain’s services sector had been virtually stagnant in January, coming in at 50.1 rather than the expected 51.0.

Analysts are concerned that this poor performance may continue unless there is some kind of certainty in the Brexit outlook soon. However, Brexit jitters also worsened yesterday as UK Prime Minister Theresa May insisted that the formal EU withdrawal date would not be delayed, worsening no-deal fears.

No notable UK data will be published today, leaving investors to anticipate any potential Brexit developments, as well as tomorrow’s upcoming Bank of England (BoE) policy decision.

 

Euro News: Eurozone Figures Help to Assuage German Economic Jitters

Concerns that Germany’s economic slowdown will last longer than previously expected or even lead to a recession kept market demand for the Euro limited yesterday.

However, some better-than-expected Eurozone data helped the shared currency to edge higher versus a weak Pound. Eurozone services and composite PMI figures beat expectations overall, as did the Eurozone’s monthly retail sales print from December.

German economic jitters persist though, and reaction to Germany’s December factory orders stats and January construction PMI figures are likely to drive the Euro today.

 

US Dollar News: Strong Data Helps to Steady US Dollar

Despite mixed market demand for safe haven currencies like the US Dollar, investors sold the Pound versus the US Dollar yesterday as recent US data continued to keep the ‘Greenback’ appealing compared to Sterling.

Last Friday’s strong US job and manufacturing stats bolstered Federal Reserve interest rate hike bets despite the Fed’s dovishness last week. Even though we saw weak US factory orders data on Monday, the US Dollar remained appealing thanks to Friday’s stats.

US trade balance results and productivity figures will be published today, which could keep the US Dollar appealing if they impress investors.

 

Canadian Dollar News: Oil Prices Stabilise but Canadian Dollar Remains Strong

After strong performance in the past week, oil prices slumped back yesterday as the commodity fell back from its days of gains.

However, while the Canadian Dollar has gained from oil price strength in recent sessions, the drop in crude prices yesterday didn’t particularly weaken the Canadian Dollar. In fact CAD remained appealing on lingering demand for riskier currencies.

Canadian housing starts and building permits data will be published today, as will January’s Canadian Ivey PMI. If these stats beat expectations, they could cause further losses in the Pound to Canadian Dollar exchange rate.

 

Australian Dollar News: Reserve Bank of Australia Tone Bolsters AUD Demand

While this week’s Australian data has been largely disappointing, the ‘Aussie’ saw a jump in demand yesterday as the Reserve Bank of Australia (RBA) took a less dovish tone than expected on its monetary policy outlook.

Australian interest rate cut bets had been rising in recent weeks, but the RBA showed no signs that it planned to cut rates any time soon. As a result, rate cut bets lightened and the Australian Dollar strengthened.

Amid a lack of notable data until tomorrow, the Australian Dollar’s continued reaction to the RBA news and this morning’s speech from RBA Governor Philip Lowe will be in focus today.

 

Upcoming Data

 

Wednesday, 6th February

01:30    RBA Governor Lowe Speech

07:00    German Factory Orders

08:30    German Construction PMI

13:15    Canadian Housing Starts

13:30    Canadian Building Permits

13:30    US Trade Balance

15:00    Canadian Ivey PMI

 

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To keep up to date with the Euro, visit the EUR blog in our Currency News section.

 

Joe Mayhew

Senior Currency Broker

Jam@fcgworld.co.uk

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