What’s happening: The British pound recorded losses against the US dollar on Thursday, falling to around nine-month low levels.
What happened: The US dollar began the year by rising sharply on prospects of support from incoming President Donald Trump’s policies.
Investors also assessed economic data from the UK, which exerted pressure on the sterling on Thursday.
Why it matters: In 2024, the decline in the British pound versus the US dollar was less steep than other G10 currency, as sticky inflation forced the Bank of England to become more cautious about lowering interest rates.
The UK economy stagnated, with the latest figures suggesting no growth in the third quarter. The Bank of England remained dovish at its final policy meeting of 2024, which exerted pressure on the sterling. The BoE maintained its key interest rate at 4.75%, in-line with expectations. However, three officials voting in favour of a rate cut increased speculations of UK’s central bank lowering rates sooner this year than was earlier anticipated.
Trump is scheduled to return to the White House on January 20. Markets expecting his pro-business policies to provide a boost to economic growth, while also resulting in inflationary pressures. As a result, the US Federal Reserve is expected to slow its monetary policy tightening this year, which would boost demand for the greenback.
Strength in the US dollar exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, jumped more than 0.8% to 109.39 on Thursday.
Markets were also concerned about the impact of Trump’s proposed trade tariffs on UK’s trade, which weighed on the pound.
The UK reported weak manufacturing data, with the S&P Global flash manufacturing PMI declining to 47 in December, from 48 in the previous month. The figure also came in lower than the preliminary reading of 47.3. The latest reading signalled the fastest contraction in the region’s factory activity in 11 months.
The GBP/USD tumbled more than 1% to 1.2382 on Thursday, declining to its weakest level since April 2024. The EUR/GBP forex pair gained around 0.2% to 0.8294.
London’s FTSE 100 surged 1.07% to settle at 8,260.09 on the first trading session of 2025, notching its strongest level in around three weeks and outperforming its European rivals.
What to watch: Investors await the release of economic data on consumer credit (1330 UAE Time), M4 money supply (1330 UAE Time) and net lending to individuals (1330 UAE Time) from the UK today.
Net consumer credit in the UK, which grew by £1.1 billion in October, is expected to rise by £1.2 billion in November. Analysts expect money supply in the UK to increase by 0.1% in November, following a 0.1% decline in October. Net lending to individuals, which rose by £4.5 billion in October, is projected to grow by £4.4 billion in November.
Context: Wall Street stocks settled lower on Thursday after opening on a strong note during the first session of 2025.
Details: US stocks opened higher on Thursday, but fell as the session progressed, extending losses from the last session of 2024. However, stocks recorded gains last year, with the S&P 500 adding 23% in 2024.
An almost 3% decline in Apple’s shares weighed on the overall market. Tesla’s shares fell more than 6% after the EV maker reported a decline in deliveries for 2024. Nvidia’s stock rising around 3% offset some of the overall decline in Big Tech shares on Thursday.
Data released on Thursday showed initial jobless claims in the US declining by 9,000 to 211,000 in the latest week. The figure was the lowest in eight months.
Although the S&P Global US manufacturing PMI tumbling to 49.4 in December, from 49.7 in November, it came in higher than the preliminary reading of 48.3. Construction spending came in unchanged in November, versus a 0.5% gain in October.
The Dow Jones index shed 151.95 points, or 0.36%, to close at 42,392.27 on Thursday, after surging more than 300 points earlier during the session. The S&P 500 fell 0.22% to settle at 5,868.55, while the Nasdaq 100 lost 0.17% to close at 20,975.62.
What to watch: Data on US ISM manufacturing PMI (1900 UAE Time) will be released today. The ISM manufacturing PMI for the US, which improved to 48.4 in November from 46.5 in the previous month, is expected to increase slightly to 48.5 in December.
Other Markets: Asian trading indices traded mixed this morning, with the Asian Dow, Hong Kong’s Hang Seng up by 0.36% and 0.87% and Japan’s Nikkei 225, China’s Shanghai Composite and India’s Sensex down by 0.96%, 0.46%, and 0.58%, respectively.
The flow of Russian gas to Europe has been halted, after Ukraine refused to renew the five-year-old transit agreement. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Canada’s S&P Global manufacturing PMI climbed to 52.2 in December, from 52 in the previous month. The latest reading also topped market expectations of 51.9, lending support to the CAD/USD forex pair.
Philippines’ producer prices rose 0.3% year-over-year in November, following a 0.4% decline in October, which sent the PHP/USD pair lower in forex trading this morning.
Singapore’s manufacturing PMI rose to 51.1 in December, from 51 in the previous month. The region’s factory activity expanding for the 16th straight month lent support to the SGD/USD forex pair.
The EIA (Energy Information Administration) said that US crude inventories had declined by 1.178 million barrels in the latest week. This being the sixth week of contraction sent the WTI crude oil prices higher this morning.
Spain’s unemployment change (1200 UAE Time) and tourist arrivals (1200 UAE Time), Germany’s unemployment change (1255 UAE Time), unemployed persons (1255 UAE Time) and unemployment rate (1255 UAE Time), South Africa’s ABSA manufacturing PMI (1300 UAE Time), UK’s mortgage approvals (1330 UAE Time) and mortgage lending (1330 UAE Time), Mexico’s foreign exchange reserves (1500 UAE Time), Turkey’s MPC meeting summary (1500 UAE Time) and foreign exchange reserves (1530 UAE Time), India’s bank loan growth (1530 UAE Time), deposit growth (1530 UAE Time) and foreign exchange reserves (1530 UAE Time), Mexico’s business confidence (1600 UAE Time) and unemployment rate (1600 UAE Time), as well as US EIA natural gas stocks change (1930 UAE Time), Baker Hughes oil rig count (2200 UAE Time) and Baker Hughes total rigs count (2200 UAE Time).