Panic over


The first serious US economic statistic of the new year appeared on Thursday and it was not good news for the USD. ISM's purchasing managers' index for the manufacturing sector - held by investors to be more significant than the Markit version which came out on Wednesday - was more than five points lower on the month at 54.1. Although it was still well into the growth zone above 50, it showed notable slowing of growth and was the lowest reading in two years.

Investors paid more attention to the soft PMI than they had two hours earlier to a particularly strong 271k employment change number from ADP National Employment Rate. There are signs that the heady optimism of 2018 has given way to greater caution, to the extent that futures markets now indicate a possible rate cut by the fed in 2020.


Although they were not as worrisome as the American PMI reading, this morning's data from Euroland were also almost universally disappointing. Italy's services PMI was ahead of forecast and higher on the month at a modest 50.5 but the rest of the numbers missed the mark. French services were down at 59.0, Germany managed a soggy 51.8 and the euro zone as a whole got a 51.2. Euroland producer prices fell 0.3% in December and the headline rate of inflation slowed to a provisional 1.6%.

In a choice between the EUR and the USD investors considered the euro to be cleaner of the two dirty shirts. It edged ahead by a quarter of US cent, 0.2%.


Following Wednesday's hair-tearing - regarding China's slowdown and Apple's falling sales - investors adopted a slightly calmer approach on Thursday (though it did not prevent them from punishing Apple's market valuation). The safe-havens lost some of their allure and the CAD moved higher, helped by a 4% uptick in oil prices.

There were no Canadian data to help or hinder the Loonie. It gained 1.3% on the day against the USD, entirely as the result of the change in sentiment.


Sentiment towards sterling improved too. It went up by 0.7% against the USD.  The negativity that had followed the new year holiday dissipated, though not to the extent that investors were suddenly positive about the GBP; Brexit still looms, after all. But the antagonism lost its edge.  

Whilst this morning's UK economic statistics fell well short of brilliance the one that mattered - the services PMI - was at least respectable. At 51.2 the figure was higher on the month and half a point ahead of forecast.  The other numbers all fell short in one way or another. House prices fell 0.7% in December, and personal loans and mortgage approvals were lower too.


After its brief meteoric surge on Wednesday the yen spent yesterday giving back some of its gains. It was 0.3% lower on the day against the USD. As with the remainder of the field, it was not that investors suddenly changed their minds about the JPY, more that they looked back on the previous 24 hours and wondered what on earth they had been thinking.

The first and only ecostat of the week was this morning's Nikkei manufacturing PMI. At 52.6, ahead on the month and exceeding expectations, there was nothing at all wrong with it but investors were not in a mood to buy the JPY. 

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