Confidence is key
Pound volatility declined in light of a less eventful day domestically and global risk appetite ebbed slightly producing a mildly negative effect on the Sterling. The Euro drifted lower to re-test the 1.1870 mark, but the Pound dipped close to 1.3100 on the Dollar. Today’s PMI business confidence data will be a key focus and despite forecasts of a modest improvement for January, markets will be looking for extra after this week’s CBI report. If confidence prints as forecast or below, the expectations of a UK interest rate cut will increase once again and Sterling will deflate. At market open the Pound trades at 1.3130 on the Dollar and 1.1890 against the Euro.
US initial jobless claims increased to 211,000 in the latest week from a revised 205,000 previously but were again below consensus forecasts. The Kansas City Fed manufacturing index improved slightly to -4 from -7 previously.
The US markets’ mood remained tilted to the risk-off trading in response to developments from the Wuhan coronavirus, which has now spread to other Chinese cities (including Beijing) and the first case of the virus has been reported in Singapore.
Later in the US data space, Markit will publish its advanced manufacturing and services gauges for the month of December in what will be the sole releases.
The Euro fell to seven-week lows of 1.1036 yesterday against the Dollar, breaching support and with the downside break, the single currency now looks like to have lost its upward trajectory.
Germany’s Markit Manufacturing PMI for January is forecasted to have risen to 44.5 in January from December’s 43.7. Meanwhile, Eurozone’s Manufacturing PMI for January is expected to print at 46.8 versus December’s 46.3. A reading coming in below forecasts would validate President Lagarde’s concerns on downside risks to the economy and may strengthen overall bearish pressure on the Eurozone. If the PMI numbers beat estimates, more so by a big margin, the Euro may find buyers.
Apart from the German and Eurozone PMI numbers, further directional bias may also come from ECB President Lagarde’s speech this morning. As of writing, the Euro is trading at 1.1055 against the Dollar.
Data to watch
08:15 – EUR – French Flash Services PMI
08:15 – EUR – French Flash Manufacturing PMI
08:30 – EUR – German Flash Manufacturing PMI
08:30 – EUR – German Flash Services PMI
08:30 – GBP – MPC Member Haskel Speaks
09:00 – EUR – Flash Manufacturing PMI
09:00 – EUR – Flash Services PMI
All day – All Currencies – WEF Annual Meetings
09:30 – EUR – ECB President Lagrade Speaks
09:30 – GBP – Flash Manufacturing PMI
09:30 – GBP – Flash Services PMI
09:30 – USD – Treasury Sec Mnuchin Speaks
14:45 – USD – Flash Manufacturing PMI