The British pound has started the New Year with sharp losses. In the North American session, GBP/USD is trading at 1.2626, down 0.82%.
UK Manufacturing PMI eases lower
The UK manufacturing sector remains in the doldrums. December’s Manufacturing PMI eased to 46.2, below the consensus of 46.4 and shy of the November reading of 47.2, which was a seven-month high. Manufacturing production has now declined for ten straight months. The December decline was driven by weaker demand abroad for UK goods and less optimism from manufacturers about business conditions. The weak UK economy and high borrowing costs continue to dampen manufacturing activity, with no signs that the New Year will bring better tidings.
The UK releases Services PMI on Thursday. The services sector is in better shape than manufacturing although the PMI posted three consecutive declines late in the year. The c consensus for December stands at 52.7, which would indicate slight expansion.
In the US, the markets are in a cheery mood on expectations that the Federal Reserve will start to trim interest rates as soon as March. The Fed surprised the markets at the December meeting when it didn’t push back against rate-cut expectations. Fed Chair Powell signalled that the Fed expected to cut rates three times in 2024, less than the market’s forecast of up to six cuts but more than the two cuts the Fed signalled in September.
The markets have celebrated the apparent end of the rate-tightening cycle, with equities rising and the US dollar retreating. Investors will be keeping a close look at the FOMC minutes on Wednesday, looking for further insights into the Fed’s dovish pivot on rate policy.
- There is resistance at 1.2753 and 1.2807
- GBP/USD pushed below support lines at 1.2678 and 1.2624 earlier. Below, there is support at 1.2549