The first week of 2019 has been an eventful one for markets. Dismal sales numbers from Apple created a flash crash in the market, causing the Pound to slump near two-year lows versus the US Dollar (GBP/USD). Other currencies also felt the effects; the South African Rand reached a three-month low (ZAR/USD), the Australian Dollar tumbled to a 10-year low (AUD/USD), and the Japanese Yen jumped as investors headed for safe-haven assets.
Brexit Fears Mount as Confidence Falls – GBP Vulnerable
Weighing on the Pound at the moment are Brexit concerns. Markets are fearing a disorderly Brexit and companies are stockpiling supplies in case of trade disruptions. Investors are looking towards the mid-January vote on Theresa May’s Brexit proposal, which still remains unpopular. The European Union isn’t open to renegotiating, and the Democratic Unionist Party which props up May’s government still has problems with the deal. Amid all this, recent data has shown UK consumer confidence has ebbed to its lowest since 2013.
‘The latest figures show that the YouGov/Cebr Consumer Confidence Index dropped to 104.4 in December, down 2.5% on the previous month, hitting the lowest level since May 2013. Only once over the last half of 2018 was the headline metric positive.’
Meanwhile, in the Eurozone, there are questions being raised over the European Central Bank’s (ECB) decision to remove its monetary stimulus. Additionally, there are worries over Italy’s banking system after the ECB placed Banca Carige into administration. The coalition government may need to use taxpayers money to rectify the situation, something that may not go down well with voters ahead of the upcoming European elections.
US Change in Non-Farm Payrolls Smashes Forecasts
In other news, today’s US Non-Farm Payrolls data has surprised markets with an unexpected surge. The figure came in at 312K in December, a far sight higher than the 184K forecast and the previous 176K reading. US wage growth also expanded by 3.2%.
A #Fed “told you so”?
With the exception of higher labor participation which supports the notion of some remaining slack in the labor market, this strong December jobs report will be seen IMO by #CentralBankers as supporting more rate hikes & no tweaks to the balance sheet policy https://t.co/p7F5PGChsP
— Mohamed A. El-Erian (@elerianm) 4 January 2019
The US labour market has now added jobs for 99 consecutive months, the longest run on record.
The GBP/EUR exchange rate is trading at1.1120. The GBP/USD exchange rate is trending in the region of 1.2624.