Daily Market Report - 05/01/2015

New Year, new low! This morning the Euro vs US Dollar rate fell to its lowest level since June 2010.  The US Dollar is also at its strongest since July 2013 against the Pound.
Given current conditions we expect the Euro and the pound to come under continued pressure from the US dollar over the Medium Term. With these levels of volatility it may be worth considering a forward or a stop loss to protect budgeted rates of exchange.

The Pound lost ground on Friday and fell from annual highs against the Euro after UK manufacturing unexpectedly slowed to a three-month low in December as weak growth in overseas markets such as the euro area undermined demand. The report showed overseas orders stagnated in December, highlighting the economy’s dependency on domestic demand to sustain growth. 
The Bank of England also said that consumer credit rose 1.3 billion pounds ($2 billion) in November, the most since February 2008. It also said mortgage approvals declined in November, though by less than economists forecast.

The value of the euro fell to its lowest level since the middle of 2010, following comments from Mario Draghi, the president of the European Central Bank (ECB). In a newspaper interview, he hinted again that the bank might soon start a policy of quantitative easing to try to stimulate the Euro zone economy. The aim would be to stop the continued fall in the general level of prices. The euro fell 0.4% to $1.2034 after Mr Draghi's comments were made public.

The Dollar took full advantage of the UK’s figures on Friday, strengthening over two cents against the Pound despite disappointing manufacturing figures from the US. A slowdown in orders growth indicates companies are beginning to scale back capital spending plans as overseas markets slow and lower oil prices hit American oil producers. At the same time, U.S. factory floors will probably stay busy early this year as employment gains and cheap gasoline boost consumer spending, settling into a more sustainable pace of growth as the year drew to a close.

Key Announcements:
09:30 – GBP: UK PMI construction (Dec) expected to fall from 59.4 to 59.0
13:00 – EUR: German Consumer price Index (YoY) (Dec) expected to fall from 0.6% to 0.3%

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