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Boris’ Brexit sinks Sterling

Boris’ Brexit sinks Sterling


UK PMI manufacturing figures produced a 9 month high of 50.0, beating the preliminary estimates of 49.8. Domestic orders increased but export orders declined for the third month on the bounce. Business confidence rose to  an 8 month high but inventories declined sharply. The Pound failed to benefit from the data; ceding ground throughout the day. 

GBPUSD fell more than 1.5% on Monday, with the pair falling from highs of around 1.3200 after Prime Minister Boris Johnson’s first speech setting out negotiation terms with the EU. Barnier stressed the need for a level playing field while Johnson rejected the need to follow EU rules (alignment). The EU warned that access to the single market will depend on how far London agrees to adhere to such rules, rekindling fears Britain will reach the end of the 11-month transition period without a deal. Sterling dipped to test the 1.3000 mark on the Dollar while the Euro broke below the 1.1765 mark. 

Despite firmer global risk conditions the Pound managed only a marginally recovery overnight and dipped again at market open, ahead of the PMI construction data. 



The final US PMI manufacturing reading was revised slightly higher to 51.9 from the flash reading of 51.7, although this was the lowest reading for three months as exports declined. The ISM manufacturing index strengthened to 50.9 for January from a revised 47.8 the previous month. This reading was above consensus forecasts of 48.5 and the strongest reading for six months. New orders and production also moved into expansion territory for the month with a recovery in export orders. Unfilled orders and employment continued to decline, however, even though the rate of contraction was slower. 

The data overall offered significant reassurance that tariffs-related stresses were easing, but the ISM warned that the coronavirus outbreak would have a negative impact on the February data. The dollar made net gains following the data with the Euro retreating to below 1.1050 before a slight recovery and traded around 1.1055 this morning.



The final Euro-zone PMI manufacturing index was revised marginally higher to 47.9 from the flash reading of 47.8 and this was the slowest pace of contraction since April 2019. Business confidence also strengthened to a 16-month high for the month, although there were job losses across the Euro-zone for a ninth successive month. After failing to break above 1.1095 on Friday, the Euro has continued to drift lower with the Dollar recovering some ground as high liquidity offered support. 

With the Dollar making slight gains following the positive ISM data yesterday, the Euro retreated to below 1.1050 before a slight recovery. As of writing it finds itself at the 1.1055 figure.

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