The pound put in a final rally in a spectacular end to the year; a year in which the pound was the second top performing major currency. On the last day of the year, Tuesday, the pound euro exchange rate rallied 1%, hitting a high of €1.1832. Across the month of December, the pound rallied 0.75%, its fifth straight month of gains after rebounding off low of €1.0639 in August. The pound was edging lower in early trade on Thursday.
Gains in the pound at the end of last year were extenuated by thin volumes in the forex market ahead of the New Year break. However, a more conciliatory tone and no nasty surprises from Boris Johnson has provided some support to the pound, which remains some 200 points below the post 12th December election high.
Investors and traders will start returning to the market today although volumes are expected to remain thin until Monday.
Today attention will turn towards UK manufacturing activity data. Analysts are expecting UK manufacturing sector to remain deep in contraction in the final reading for December at 47.6, up marginally from 47.4. The figure 50 separates expansion from contraction, highlighting the struggles faced by the UK manufacturing sector ahead of Brexit on 31st January.
Whilst the UK will leave the EU on 31st January it will remain in the single market and customs union until the end of the transition period on 31st December 2020. During this period Brexit trade negotiations will take centre stage driving the pound.
German Retail Sales & Manufacturing In Focus
The euro traded broadly higher in December, albeit less so than the pound. The euro advanced on improved risk sentiment as amid the announcement of a US — China first phase trade deal. President Trump has confirmed that the deal will be signed on 15th January before Trump heads to Beijing to discuss the next phase of the trade deal.
The news not only lifted the euro owing to improved risk sentiment, but investors also hope that the phase one trade deal will boost the outlook for exporter nation Germany, which has been hit by slowing global demand amid the trade dispute.
Investors are keen to see the bottoming out of the slump in the Germany economy, particularly the manufacturing sector which remains deep in contraction. German retail sales and German manufacturing pmi readings will be in focus today.
| 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 GBP = 1.13990 EUR Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound . Or, if you were looking at it the other way around: 1 EUR = 0.87271 GBP In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro. |
