Sterling sits higher against the EUR and USD

Daily Currency Update

The US held the macroeconomic headlines on Friday. The manufacturing sector contracted in November for the 13^th consecutive month, registering 46.7 percent which was below the forecast 47.9. This was followed by Fed Chair Powell speaking twice in Atlanta, as market participants searched for any clues to the next move from the Fed in its progressive fight against inflation. A growing sentiment that the US will start to cut interest rate in the first half of 2024 has led to a selloff in the USD recently and Powell did little to change this sentiment, despite warning that it was ‘premature’ to speculate when policy might ease. Smaller data releases elsewhere on Friday showed UK and European manufacturing PMI picked up from previous releases and exceeded forecast. However, both remained under the 50.0 gauge which tilts from contraction into expansion. The Nationwide house price index from the UK showed a continues recovery in November. GBP/USD peaked at 1.2720 on Friday and GBP/EUR touched 1.1680. EUR/USD has continued to decline since breaking 1.1000 last Wednesday.

Data is thin on the ground today, but we anticipate employment data from the US over the week and Bank of England Bailey is due to hold a press conference on Wednesday about financial stability report. Australia also has some key releases with their interest rate decision expected overnight and GDP quarter-on-quarter overnight into Wednesday.