Daily Currency Update

USD - United States Dollar

The Greenback is ending the week higher for a third week, amidst worries about the virus in China and a strong North American equity market. The offshore Yuan weakened due to concerns about the spread of the coronavirus. However, the most important piece of local economic data came from flash manufacturing PMI numbers, which is a survey of purchasing managers in the manufacturing industry in the U.S.

According to IHS Markit, which compiles Purchasing Managers Index (PMI) worldwide, the Flash U.S. Composite Output Index came in at 53.1 (January) versus 52.7 in December, which is a 10-month high. However, the Flash U.S. Manufacturing PMI came in at a 10-month low of 51.7, while 52.5 was expected and 52.4 was reported in December.

At the time of this writing, the EUR/USD trades at 1.1130, representing a decrease of 0.23 percent.

Key Movers

The Euro got slammed after ECB Governing Council Member Olli Rehn said that the Euro area inflation expectations are stranded at a depressed level. However, IHS Markit’s composite Purchasing Managers’ Index for Germany rose to a five-month high of 51.1 in January, beating forecasts for a 50.5 reading. Furthermore, very early today in Europe, the composite PMI in the Eurozone was unchanged, coming in at 50.9 in January, which was the same as in December but below the estimate of 51.2. According to Bloomberg Economics, this is consistent with the expansion staying broadly stable in the first month of 2020. Bloomberg Economics expects sentiment and activity to start improving more decisively into 2020.

What happened with the Pound was even more astonishing. Although the robust PMI numbers confirmed positive data for the U.K. economy, the Sterling tumbled, inducing market participants to sell likely to avoid the risk of a rate cut next week, which for now is staying at 0.75 percent. The Sterling had been rising over the previous few days, but it fell after Friday’s U.K. Purchasing Managers’ Index data rose to the highest level since 2018 in January. Most market participants are wondering if this is just a profit-taking price action or if there is something else that the market is pricing.

Expected Ranges