Sterling Outperforms Dollar as Trump Demands Rate Cuts
- Jan 24
- 2 min read
Updated: Feb 19
GBP : PMI data better than expected
The preliminary United Kingdom (UK) S&P Global/CIPS Purchasing Managers Index (PMI) data for January has been unexpectedly stronger than anticipated, which has caused the GBP to appreciate against its key counterparts on Friday. The Composite PMI increased more quickly, from 50.4 in December to 50.9 in January, according to the agency. Given that the PMI came in at 50.0, economists anticipated that it would have barely increased. The Composite PMI grew robustly due to robust business activity in both the manufacturing and services sectors.
Despite January's strong company activity overall, S&P Global analysts expressed concerns about declining labor demand in the face of declining sales and fears about corporate outlook.
Chancellor of the Exchequer Rachel Reeves stated in a Wall Street Journal (WSJ) interview conducted on the sidelines of the World Economic Forum in Davos that she is ready to unveil fresh fiscal measures in a budget update on March 26 to make sure fiscal regulations are followed. The government will only rely on foreign funding for investment, Reeves declared in the Autumn budget.
EUR : Euro looking optimistic
The Euro has had a great start to the week, as evidenced by this morning's brief rise above the 1.05 mark. With the common bloc's strong reliance on external demand (the export to GDP ratio is above 50%), especially from the US and China, the possibility of President Trump taking a more lenient position on trade protectionism is a certain optimistic signal for the euro.
A new boost to the currency has come from a more positive set of business activity PMI data.The flash composite index from S&P jumped back above the level of 50 for the first time August in January (50.2). This follows a surprise to the upside in the manufacturing sector (46.1 vs. 45.3) and a modest miss in the services index (51.4 vs. 51.6).
USD : Markets settling after Trump's inauguration
As the turbulence that followed Trump's inauguration at the beginning of the week continued to fade, the US dollar (USD) was comparatively quiet yesterday.
Investors in the USD appeared to be waiting for the new US president to announce any new policies, especially in the areas of tariffs and fiscal policy. The most recent S&P Global US PMIs will be released this afternoon. Even while these surveys don't have the same influence as the ISM PMI surveys, they might still be able to help the USD if they demonstrate a strong increase in activity in the service sector.
