The Pound has recovered all of its losses from the festive period and his heading toward to strong end to the week. Anyone looking to purchase Euros may wish to take advantage of these present rates. This buoyancy arrives despite December’s service sector purchasing managers index (PMI) slipping to 49.7 from 53 in November. Any figure below 50 is considered to be bad and indicates that companies are reporting a decline in business
An alternative argument is that the cold weather during December hit the service sector. Analysts are therefore looking to see if these figures rebound over the coming months. If this is the start of a trend the Pound will be put under pressure.
The US Dollar has also maintained its strength after Wednesday’s strong employment data. Attention is now being paid to today’s non-farm payroll announcement. This is one of the key economic indicators of the month and will show whether the US recovery is benefitting Main Street as well as Wall Street. If the figures show sustained growth than we will expect the US Dollar to rally. On the other hand a consistent decline will cast doubt over the economic recovery.
“There have been positive developments for the U.S. economy pointing to a more sustained recovery, whereas investors remain concerned about developments in the UK and Europe,” said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
Over on the continent the Euro continues to struggle after a series of sluggish economic data was released yesterday. European consumer confidence, business confidence and retail sales figures all underwhelmed. This suggests the European economies, especially the peripherals are all struggling to recover from the recession. Further to Wednesday concerns over Portugal’s ability to finance its deficits, the markets are becoming very bearish about Europe.
The corollary of this as always is Germany. The German economy is very strong and seems to have not been affected by the European debt crisis. German factory orders increased by 5.2% in November 2010, following a 1.6% rise in October. Orders from countries outside the European Economic Area were up almost 15%, which is particularly robust. The weak European currency is clearly benefitting Germany, which coupled with her strong economy is having a positive impact on exports.