Smart Daily Currency Note | Happy New Year as the US pulls back from the fiscal cliff

Sterling

Sterling had a good day on Monday strengthening across the board. This seemed to be on the back of markets correcting an excessive drop off in sterling's value over the holiday period. Sterling reached a peak of 1.233 against the euro and has pushed past the 1.630 mark against the US dollar as risk appetite increased with the US pulling back from the "fiscal" cliff.. Today sees the release of the Purchasing Managers Indices (PMI) data for the UK manufacturing sector and the markets will be hoping for the first positive swing in the last 6 months which could well back up Monday's positive trend for sterling. Get in touch with your trader today to find out where exchange rates are heading as trading volumes increase again.

Euro

The euro struggled on Monday as the German Chancellor said in her New Years speech that the debt crisis in Europe is "far from over". The only actual data of any significance released on Monday saw Greek retail sales fall 17.1% from a year earlier. Markets were shut yesterday for New Year's but today we will see the preliminary German inflation data released as well as manufacturing PMI data for both Spain and Italy. Get in touch now to get the most up to date price.

US dollar

The US dollar struggled on Friday as risk appetite dominated across the global markets due to increased expectation of a deal being being made to stop the US tumbling over the so-called fiscal cliff. Late last night, the House of Representatives signed off on a deal which avoided the $536 billion worth of tax increases and $109 billion worth of spending cuts automatically being implemented despite a large number of Republicans rejecting the bill. The $109 billion worth of spending cuts that were due to come into effect have been delayed for two months to allow for more time. A deal was struck regarding the tax increases which included income tax cuts for those that earn less than $400,000, much more than the $250,000 the Democrats were seeking to allow. Furthermore, deals were agreed regarding inheritance tax, capital taxes, unemployment benefits and tax credits, all of which will help avoid the fiscal squeeze that many economists thought would have pushed the US back into recession. Manufacturing PMI data will be released today alongside data on construction spending and inflation data related to the manufacturing industry. Call in now to see how the US dollar will react now that the fiscal cliff has been avoided.

Worldwide

Elsewhere, the headlines were once more dominated by the Japanese yen, continuing to lose ground versus its major peers. Continued speculation that the Bank of Japan are set to increase quantitative easing saw demand for the currency fall throughout the day. It was a better day for the Canadian dollar, gaining the most it has in a month versus its US counterpart, as increased levels of risk-appetite throughout the day saw demand for riskier assets increase. As would be expected Monday saw the release of very little data, with Australian Private Sector Credit coming out slightly worse than forecast, and Chinese Manufacturing PMI showing a slight improvement at 51.5. We saw the release of more Chinese Manufacturing PMI data yesterday; but, there is very little data expected out today. Call in now for the latest news and a live price.