The dollar’s decline ended up driving trading more than December’s manufacturing PMIs this Tuesday morning.
While the UK manufacturing PMI failed to match the 58.2 seen in November and 58.0 forecast by analysts, at 56.3 the sector still finished 2017 in decent health. This only gave sterling a minor boost, however, with the pound’s growth against the dollar largely remaining at 0.3% aftermath of the release. That leaves cable lurking around $1.355 and at its best price for more than 3 months, as investors continue to desert the dollar despite Trump’s recent tax reform success.
Yet the pound wasn’t the star of 2018’s first day of trading. No, that honour went to the euro, which showed no sign of shedding the barnstorming form that defined the currency’s final fortnight of 2017. With the eurozone manufacturing PMI at a record high of 60.6 – prompted by country-specific all-time peaks for Austria, Germany and Ireland – the euro surged half a percent against the dollar, sending it above $1.206, while nabbing 0.2% off sterling to send its rival to a fresh 5 week nadir.
The euro’s muscular morning, of course, spelt disaster for the eurozone indices. The DAX dropped half a percent, leaving the index just 10 points above 12800, while the CAC plunged more than 1% as the day went on. The FTSE was similarly perturbed by it’s the pound’s gains, falling 0.4% to slip below 7650.
Looking to this afternoon and the Dow Jones is set to benefit from the dollar’s decline, with the futures pointing to a 50 point increase when the bell rings on Wall Street. The Dow’s had a pretty stagnant few weeks, failing to react too much to Trump’s tax triumph as it struggles to break above 24800 with any sense of momentum. A final Markit manufacturing PMI of 55.0 – an improvement on December’s 53.9 – is unlikely to drastically change that.
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