GBP/USD: UK and US Manufacturing in Focus As Investors Brace For A Busy Week

The euro advanced versus the US dollar in the final trading session of the year on Tuesday. The euro US dollar exchange rate climbed 0.1% to close the year at US$1.1213. The euro recorded a 1.7% jump in value versus the greenback across the final month of the year. The pair was on the rise as trading kicked off in 2020.

Optimism over progress in the US — China trade dispute has helped lift the euro over the past month. The announcement of a phase one trade deal has not only lifted the euro thanks to improved risk sentiment, investors are also optimistic that the truce between the two powers could lift the economic outlook for exporter nation Germany.

The manufacturing sector in Germany, Europe’s largest economy, has been hit by slowing global demand amid the US — China trade dispute. With a trade deal due to be signed on 15th January, there is growing optimism that the global economy will improve. Investors will want to see a bottoming out of the slump in the Germany economy and more particularly the German manufacturing sector.

Today investors will be looking closely as Eurozone and German manufacturing pmi data is due to be released. Analysts are expecting the German pmi to remain deep in contraction at 43.4 in December, whereby the figures 50 separates expansion from contraction.

German retail sales could also attract investors’ attention. So far, the German consumer sector has remained resilient despite the slump in manufacturing. Analysts are forecasting that German retail sales increased 1% month on month in November, up from a -1,6% decline in October. A strong reading could boost the euro.

Dollar Dips As Trade Tensions Ease

Investors have been selling out of the US dollar en masse across the past week. With the first phase trade deal due to be signed and formally entered into in the coming weeks, sentiment towards the global economy has improved dragging on demand for the safe haven US dollar.

News that China has slashed its reserve ratio by 50 basis points has lifted risk sentiment across the Asian session. The news overshadowed data which showed that growth in China’s manufacturing sector slowed slightly

Investors will now look towards US jobless claims and manufacturing pmi data for further clues as to the health of the US economy. Analysts are expecting the US manufacturing sector to have remained in expansion territory in December. Any sign of weakness could drag the dollar lower.

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.

 


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