Dollar Holds Firm, Euro and Pound Are Weakening

Dollar Holds Firm, Euro and Pound Are Weakening


The dollar advanced for the second consecutive session on Tuesday, despite the publication of a somewhat “fair” activity index in January in the United States. The dollar index was up Tuesday night from 0.22% to 96.06 points, a few hours from Donald Trump’s speech on the state of the Nation.

The euro was down 0.21% to $1.1412, while the pound fell 0.63% to $1.2955 as negotiations on Brexit still seem deadlocked. In addition, the Markit/CIPS IHS Services Index collapsed in the UK in January to its lowest since July 2016, at 50.1 vs. 51.2 in December. The activity in the services across the Channel is therefore just above the threshold of 50 which separates expansion from contraction.

Activity remains stronger in the United States than in Europe

In the United States, the ISM index of services activity, published Tuesday, fell to 56.7 in January against 57.1 expected and after 58 in December, returning to the lowest for 5 months. The Markit PMI index came out at 54.2, in line with the consensus.

Investors, however, have reacted little to these figures, which still show a strong activity. They remain optimistic for the US economy since the publication last Friday of job figures well above expectations, as well as manufacturing ISM and PMI indices above the consensus.

The euro, on the other hand, remains weakened by signs of slowing activity in the Old Continent. The final manufacturing PMI of the euro area fell in January to 50.5, against 51.4 in December, and now flirts with the contraction (characterized by a figure below 50). The IHS Markit composite index, which also includes services, fell from 51.1 to 51 in January, its fifth consecutive monthly decline.

In addition, retail sales fell by 1.6% in the euro area in December, after rising 0.8% in November.