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 13th 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.
Key Movers
The main focus for market participants will be on which central bank is likely to start cutting interest rates. As the Bank of England maintains its stance, the Federal Reserve and European Central Bank looking the most likely to cut interest rates first. This has reflected in the recent gains for the GBP, which now sits back up at 1.2700 against the USD (highest since August) and 1.1700 against the EUR (last seen mid-September). New highs for each currency pair will likely be seen if this sentiment grows but could reverse if it changes.Expected Ranges
- GBP/USD: 1.2610 - 1.2720 ▲
- GBP/EUR: 1.1580 - 1.1690 ▲
- GBP/AUD: 1.8960 - 1.9190 ▲
- EUR/USD: 1.0830 - 1.0910 ▼