Middle-East tensions rise
December’s UK PMI manufacturing printed marginally higher than estimates at 47.5; the weakest reading since 2013. Both new orders and employment continued to drop. The business confidence component was broadly optimistic, but the Pound will need definitive evidence of improvement before the market starts pricing in the optimism.
Sterling drifted lower after the data release and the pace picked up as it corrected after sharp gains on the last trading day of 2019. There was a brief flicker of hope around the 4pm fix, the 1.3200 mark was never seriously threatened and the Pound fell through 1.3150. The Euro also made ground on Sterling, peaking near 1.1743 before consolidating near 1.1764.
The Pound is lower at market open ahead of UK construction data as geo-political tensions curbed potential currency demand.
US jobless claims declined slightly to 222,000 in the latest week from 224,000 previously while Challenger layoffs declined in the latest month which suggested that the labour market was still firm. The final manufacturing PMI index was marginally lower at 52.4 from the flash reading of 52.5 which had little impact. After sharp losses at the end of 2019, the dollar recovered some ground yesterday.
The US ISM manufacturing release will be important today for further evidence on US industrial trends and will also have an impact on global economic sentiment. The December Federal Reserve (Fed) minutes and comments from Fed speakers will also be watched closely.
The Euro is lacking a clear directional bias amid the heightened US-Iran tensions and the resulting risk-off tone in the markets. The common currency, barely moved during the Asian session and is currently sidelined around 1.1150 figure.
The final Euro-zone PMI business confidence index was revised up to 46.3 from the flash reading of 45.9 with Germany also recording a slight upward revision. The Netherlands and Italian indices both registered 80-month lows, however, and overall order inflows deteriorated further during the month while employment continued to decline. The data overall dampened expectations of a wider Euro-zone recovery this year and, after posting fresh 7-month highs in early trading, German bond yields edged lower which curbed potential Euro support with a dip below 1.1200.
Data to watch
15.00 USD – ISM Manufacturing PMI
16.00 USD – Crude Oil Inventories
19.00 USD – FOMC Meeting Minutes