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My button is bigger than yours

My button is bigger than yours

GBP
Sterling has started 2018 on a firm footing against the Dollar following news UK manufacturers continue to enjoy robust growth. GBP currently trades at 1.3595 against the Dollar and 1.1290 against the Euro.

The manufacturing sector activity in the UK economy resumed its slight downtrend and fell more than expected in the month of December. The manufacturing Purchasing Managers’ Index (PMI) in the UK arrived at 56.3 points in December, compared to a previous 58.2 reading.

Against the backdrop of yesterday’s softer UK manufacturing PMI, the market now seems inclined to take some profits off the table in anticipation of yet another disappointment from today’s UK construction PMI. The figure for December is expected to drop to 52.5, compared to November’s 53.1 points.

USD

The New Year has begun with the US Dollar continuing to fall heavily, currently trading against Sterling at just under 1.3600 and the Euro at 1.2030. A sharp follow-through upsurge in the US Treasury bond yields helped ease some of the strong bearish pressure surrounding the US Dollar, which also seems to have prompted some long-unwinding pressure at higher levels.

President Donald Trump has boasted on Twitter that his nuclear button is ‘much bigger’ and ‘more powerful’ than North Korean leader Kim Jong-un’s. Mr Trump’s tweet is the latest contribution to the bickering and increasingly personalised feud between the two nuclear-armed leaders. The market didn’t flinch as a result of the tweet however heightened tensions may move the Dollar over the coming weeks.

The Minutes from December’s Federal Open Market Committee (FOMC) meeting enter the spotlight later today. The announcement sent the US Dollar tumbling even as officials called for three rate hikes in 2018 while lifting growth and employment forecasts. If the publication echoes confidence in underlying economic strength channeled by Federal Reserve (Fed) Chair Yellen at the presser following the sit-down, the Greenback may at last find a lifeline.

Today’s economic docket also features the release of US ISM manufacturing PMI which might provide some short-term trading opportunities but is likely to be overshadowed by some repositioning trade ahead of the December FOMC meeting minutes.

EUR

Markit manufacturing PMI’s yesterday for a large portion of Eurozone members all posted above the 50 mark which will please the single currency bulls. Although some readings came in below consensus forecasts, final Eurozone PMI manufacturing finished the highest it has been for 20 years at 60.6. Further, strong growth in orders will provide the Euro confidence going forwards.

That said, a slight easing in inflation pressures will keep investors on their toes, although supply chain pressures increased, likely renewing upward inflation forces once more. This will sustain the internal European Central Bank (ECB) monetary policy debate with expectations the bond-purchase programme will not extend past September.

Data To Watch:
09:00 EUR Unemployment Rate s.a. (Dec)
09:00 EUR Unemployment Change (Dec)
09:30 GBP PMI Construction (Dec)
15:00 USD ISM Prices Paid (Dec)
15:00 USD ISM Manufacturing PMI (Dec)
15:00 USD Construction Spending (MoM) (Nov)
19:00 USD FOMC Minutes

 

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