T’was 33 nights before Christmas..
When all through the foreign exchange market not a cross was stirring, not even the Pound. Sterling longs were hung by the CME with care, in the hopes that Mr (Lord) Frost would be there soon.
That’s enough poetic parody from me for this year, but Clement Clarke Moore’s scene of tranquility can be likened to the European open yesterday. The Pound was one of the only decisive movers anticipating a potential Brexit breakthrough over the next few days and optimistic about the UK’s new AstraZeneca-Oxford coronavirus Vaccine. The rest of the market displayed below average volatility and price change. The rally in the Pound too was ultimately contained short of three month highs despite several attempts to break higher.
Data yesterday should have been of relatively low salience limited to European and US Purchasing Managers’ indices (PMIs) that provide a timely reading of sentiment and confidence in underlying segments of an economy. The European PMIs came and went showing deteriorating confidence and optimism in the Eurozone economy both in manufacturing and services. The data follows rising numbers of infection on the continent and a slowdown in Q3’s swift economic rebound. Despite the downbeat data the Euro continued to find higher grounds also supported by optimism on securing a Brexit deal and tested another psychological level in EURUSD. The PMIs were largely ignored or discounted therefore.
We might have expected a similar reaction to US PMIs but the morning’s snowy scene of tranquility and calm was ripped apart by the US data. Instead of contracting as per the forecasts both manufacturing and services PMIs came in considerably better than expected (56.7 vs. 53 & 57.7 vs. 55 respectively). The psychological levels that the Dollar has weakened to throughout the morning’s trade against both the Pound and the Euro were rapidly retreated from. The data also stood in sharp contrast to a deteriorating economic backdrop across much of Europe and Asia and therefore invited optimistic assessments of the US’ near-term economic fortunes, pushing USD higher. Despite having steadied overnight and throughout today’s session so far, the severe price movements are a reminder of how quickly markets can move even within major pairs. Profit and loss orders proved their worth yesterday with the short-term moves allowing our customers to realise their FX goals.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
EU Border Controls 26,000 respondents in 18 jurisdictions have spoken and 51% of them are dissatisfied with border controls and the level of immigration into the EU. Now that is a statistic that political parties across the EU should sit up and take notice of in the next two months in the lead up to […]
UK Trade Deals While there have been deals signed with Australia in 2021 and New Zealand in 2022, the past post Brexit years in respect of trade deals have been more about which deals have not been agreed that should have been rather than those that did get signed: Canada due to the UK refusing […]
Bank of England As expected UK interest rates were left unchanged following the Monetary Policy Committee’s meeting this week. The message is clear that the Old Lady will not be rushed into making hasty interest rate reduction decisions,and, given that inflation is still at 3.4%, the market sold GBP immediately after the announcement yesterday lunch […]