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Pound Falters as UK Economy Lost Momentum in January

Pound News: UK Service Sector Growth Disappoints

Rounding off a trio of underwhelming UK PMIs, the service sector clocked its slowest rate of expansion since September 2016 in January.

As a result, the Pound (GBP) trended lower across the board on Monday, with its weakness exacerbated by the latest signs of division over Brexit within the Conservative government.

In the absence of any fresh domestic data Pound exchange rates are likely to remain under pressure today, with Brexit-based jitters dominating sentiment.

 

Euro News: Weaker Investor Confidence Failed to Knock Single Currency

The Eurozone economy continued to demonstrate signs of strength yesterday, to the benefit of Euro (EUR) exchange rates.

Even though the Sentix investor confidence index for February showed a modest dip on the month this was not enough to particularly dent the single currency.

If today’s round of Eurozone retail PMIs also proves positive, though, the Euro could extend its recent run of gains further.

 

US Dollar News: USD Benefits From Strong Non-Manufacturing Index

In another positive sign for the US economy, and the Federal Reserve, the ISM non-manufacturing composite index strengthened to a more than twelve-year high of 59.9.

This naturally fuelled bets that the Fed will pursue a more aggressive pace of monetary tightening over the coming months, encouraging the US Dollar (USD) to trend higher against many of the majors.

However, with forecasts pointing towards a widening of the US trade deficit in December USD exchange rates may return to a weaker footing in the near term.

 

Canadian Dollar News: CAD Exchange Rates Weaken as Oil Extends Losses

Oil prices continued to slip lower thanks to increasing US crude production, with Brent crude falling below the US$58 per barrel mark on Monday.

Coupled with the stronger US Dollar and a general sense of market risk aversion this left the Canadian Dollar (CAD) rather lacking in demand.

Even so, if the Canadian trade deficit narrowed in December this could offer CAD exchange rates a rallying point this afternoon.

 

Australian Dollar News: AUD Shrugs Off Underwhelming Inflation Estimate

While the TD Securities inflation estimate proved weaker than hoped this failed to particularly weigh down the Australian Dollar (AUD).

Investors were more interested in the improved Australian services PMI, which rose to 54.9 in January as the sector expanded bullishly on the month.

A similarly strong showing from tonight’s construction PMI might offer additional support to AUD exchange rates, giving markets greater cause for confidence in the economic outlook.

 

New Zealand Dollar News: NZ Commodity Price Rebound Proves Modest

While the ANZ commodity price index rebounded 0.7% in January this was not enough to fully reverse the previous month’s contraction of -1.9%.

This left the New Zealand Dollar (NZD) struggling to find particular traction on Monday, with confidence in the domestic economy still rather muted.

Greater volatility is likely in store for NZD exchange rates on the back of tonight’s New Zealand unemployment rate and wage growth data.

 

Upcoming Data

Tuesday, 06 February

09:10     Eurozone Retail PMI

13:30     Canadian Trade Balance

13:30     US Trade Balance

21:45     New Zealand Unemployment Rate

22:30     Australian Construction PMI

 

Jimi Boake 

Currency Dealer

01442 892 071

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