Uneventful start to the year (note the sarcasm)

Mixed day for Sterling!

Wednesday started off with a bang! Anyway, enough about North Korea, what I was actually referring to was the release of the Services PMI data for EU, UK and the US. The various EU Services PMIs kicked the day off with the German number taking bragging rights, coming in at 56.0 against an expected 55.4. 

The others came out broadly in line with expectation but the fly in the ointment was the French Services PMI which, at a reading of 49.8, fell below the magic 50 which signifies the line between expansion and contraction. Where the UK is concerned, the figure was bang on the forecasted 55.5. On the back of this, the pound rallied against the EUR and USD although Sterling is still trading at the lowest level against the dollar since April 2015 and before that June 2010.

The question that must be on the lips of all companies that trade in the USD – Is this trend going to continue?

Afternoon session

After lunch it was the US’s turn to unveil its ISM Non-Manufacturing PMI. Although the reading of 55.3 for December is perfectly solid, it does still represent the fourth drop in five months and raises some questions over the health of the US economy. So, why was the Dollar gaining against most other currencies? 

The ADP Non-Farm Employment change, a precursor to the main US employment number in Friday, came out at a whopping 257,000 jobs created in December which was 60,000 higher than expected. On top of that, another negative day on worldwide stock indices means investors dumping equities and heading to the relative safety of the USD.

In the evening we saw the minutes of the last Fed meeting released which revealed how the rate hike was a “close call”. Although the vote for an increase was unanimous, some members were cautious, namely because of global growth concerns and low inflation. Gradual rate rises will follow undoubtedly during 2016; however, future policy will be adjusted in line with economic conditions.


Turmoil on Chinese stock markets continued when shares fell more than 7% for the second time this week. As a result, trading was halted to limit any further losses. Expect European markets to come under pressure from the get go. That aside, investors will have mainly EU data to digest today. 

All eyes on Retail Sales and Unemployment figures at 10am. The former is looking like it may disappoint, however, the latter is expected to be unchanged. Regardless of the outcome, with the USD rallying strongly so far this year, don’t bet on that changing any time soon.