Daily Currency Update

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Sterling continues to falter despite upbeat data

GBP - British Pound

Cable fell to a 3 month low during Thursdays trade even after a rebound in retail sales. Data showed the number was up 0.9% on the month in January on a seasonally adjusted basis, after a 0.5% fall in December - the biggest rise since March. This release followed a raft of upbeat data this week for the Pound but all have failed to materialise into a Sterling rally. The main cause for the Pounds failure is largely down to Brexit and rate cut concerns.

The odds of a disorderly exit from the EU have increased to 25% from the 20% seen in January. Sterling jumped following the announcement of a new, potentially high-spending British finance minister last week but since then the quid has lost 1.4% as Brexit concerns continue to strangle Pounds advances.

Focus today will be on the release of Manufacturing PMI, coming at 9.30am this morning. A forecasted print of 49.7 will not do Sterling any favours as a number below 50 shows contraction placing selling pressure on the currency once again. The chances of a BOE rate cut in December have crept back up as well to 80% versus 69% seen on Wednesday.

Sterling moves could be on the downside again today unless the PMI prints come out better than expected but with all the noise coming from trade talks and the fears of a rate cute were not expecting a rally of any significance.

Key Movers

The Greenback continued to feed off coronavirus news yesterday, flexing its safe haven status. Its strength has pushed the euro down almost 3% this month while the yen has fallen 3.3%. On the data front, the leap of the Philly Fed Manufacturing Index to 36.7 points was the latest to boost the dollar.

AUD/USD pushed to an 11 year low, a rise in Australia's jobless rate and finally the slide in its preliminary PMIs below 50 points – implying contraction – have been weighing on the Aussie during the Asian session.

Yesterday saw the ECB’s meeting minutes released but was largely brushed aside. Take away notes pointed to a positive but modest growth ahead, the ECB needs more data to see if tentative signs of stabilisation provide a firmer ground for optimism. The single currency was given a lift this morning following a strong beat in the manufacturing reading from Germany. EUR/USD has broke above the 1.08 handle and continues to climb.

Coronavirus will still be the biggest player in the markets so tread carefully. China has reported a 92% fall in car sales in the first half of February and other economies will start posting economic data since the outbreak and could play havoc with the numbers.

Expected Ranges

GBP/USD: 1.2840 - 1.2980 ▼

GBP/EUR: 1.1900 - 1.2000 ▼

GBP/AUD: 1.9470 - 1.9610 ▲

GBP/NZD: 2.0370 - 2.0570 ▲