Our outlooks and expectations for no fewer than 19 different currencies in 2018 are now live and available on our blog. You can view them all at https://www.worldfirst.com/uk/blog/2018-currency-outlooks/. Please feel free to get in touch with any questions you may have.
USD: Onwards or upwards?
We may only be four days into the working year but today is already an important day for the US dollar as we wait on the latest jobs report from the United States. Both EURUSD and GBPUSD sit close to multi-month highs as we open up the Friday session. A poor jobs number that hints of a labour market that is starting to roll over from an extended period of strength or a market that is unable to create wage pressures will hit the USD and could easily push EURUSD above 1.2092 – a fresh three year high and GBPUSD above 1.3660 – the highest level since the Brexit vote last June.
We are looking for a strong number however with retail, manufacturing and courier jobs surging in the festive season. The consensus is that the US economy added 190,000 jobs in December and we are looking for something closer to 220,000.
Dollar weakness will remain until the release at 13.30 we feel.
GBP: Services sector creaks into 2018
As expected, sterling has continued to trade sideways this week with parliament not back until Monday.
Yesterday’s services PMI number would seem to point to an economy that is happily chugging along, however the tea leaves of the services sector continue to show that the largest constituent of UK GDP is creaking as we head into 2018. Overall activity was high but new orders were poor, employment rose but at the lowest rate for nine months, input prices leapt higher and those operating costs were offset against new employment.
Together with the manufacturing and construction numbers we foresee Q4 GDP in the UK running at 0.3% on the quarter with a bias to the downside for Q1 if the uncertainty and inherent lack of clarity from the political situation is maintained. Overnight the Federation of Small Businesses reported that confidence among its members fell to the lowest level in four years in the final three months of 2017. The Federation’s confidence reading now sits at -2.5, falling from 1.1 in Q3 and 20.0 a year ago.
Given it is Non-Farm Friday we expect the day to follow the typical schedule of a boring, incident-less morning, a skittish half an hour before the announcement, a big move as the market digests the number before it all quiets down and everyone wonders whether they are going to go to the gym once they leave work or hit the pub as per usual.
Have a great day and a better weekend.
Jeremy Cook, Chief Economist