Sunset FX Report: Pound Sterling Resilience, Euro Dominance and Dollar Hoping for a Strong Payrolls Report

• Spot Exchange Rate Quotes at Time of Publication:
• Pound-to-Euro exchange rate: 1 GBP = 1.1410 EUR
• Euro-to-Pound exchange rate: 1 EUR = 0.8764 GBP
• Pound-to-Dollar exchange rate: 1 GBP = 1.4228 USD
• Euro-to-Dollar exchange rate: 1 EUR = 1.2467 USD

Key points from the global exchange rate markets at the London close and what to look forward to over the coming 24 hours.

Pound Sterling Recovers from Recent Consolidation

Sterling put in a resilient performance, setting aside a disappointing miss on the first major data release of the year - the IHS Markit Manufacturing PMI.

However, we noted in our coverage earlier that currency markets have nothing to fear from the data as the series confirms manufacturing is running well above its long-term run rate and the exports component of the release confirms a solid bounce in export orders.

Elsewhere, we report that Kamal Sharma of Bank of America is forecasting the Pound-to-Euro exchange rate to breach 1.17 in the year ahead, provided Brexit negotiations progress in a smooth manner.

And, technical analysts at Natixis have their own reasons for expecting Sterling-Euro to head higher.

Tomorrow, we will release a report that shows a number of major institutional investors are upgrading their forecasts for the Pound in the wake fo the strong start to January.

The data calendar features the release of UK construction PMI numbers, markets are looking for a reading of 52.0, however we expect little impact to Sterling from the release owing to the sector's relatively small size in the UK economy.

US Dollar Subdued, But Big Employment Data Release Ahead

The US Dollar remains fragile with solid domestic data points apparently unable to lift the currency's mood.

Weekly jobless claims improved, falling by 1,000 to 230,000 while a 0.1% contraction in Q4 productivity was reported, which gave back some of Q3’s solid 2.7% rise, and a 2% jump in labor costs.

All eyes turn non-farm payrolls on Friday where economists are forecasting Forecasts 180,000 jobs to have been added to the economy in January. Unemployment is expected to hold at a 17-year low of 4.1%.

But, data has little impact on the Dollar at pressure, and momentum to the downside appears to be the overriding factor.

Euro is Day's Second-Best Performer

The Euro outperformed most currencies, as it continues to ride high thanks to a solid economic expansion in the Eurozone.

It is noted that the single-currency is enjoying a six-week winning streak against the US dollar, but is constrained by the other global outperformed - the Pound.

But, "with the euro near 3-year highs, it’s at heightened risk of getting talked lower by European officials who worry about the downside risks to growth from the stronger Euro," warns Joe Manimbo at Western Union.

Tomorrow the calendar for the Euro is devoid of market-moving data so we expect it to take cues from the big Dollar.