02.01.2018: European markets in red after slump in Asia: EUR/USD, GBP/USD

02.01.2018: European markets in red after slump in Asia: EUR/USD, GBP/USD


The first trading day of the new year came
as an unpleasant surprise to European traders. Downbeat data from China sent shock waves
across global markets. Investors are discouraged with contraction
in China’s manufacturing sector which is the key sector for the second largest global
economy. The gloomy investor sentiment triggered massive
purchases of safe haven assets, including the US dollar. The euro/dollar pair rebounded to the previous
highs despite robust activity of the euro bulls. The chart of the currency pair reveals a tough
battle between the bulls and bears. Eventually, dollar buyers notched up a victory. The single European currency has been hurt
by economic data from the eurozone. Business activity in the eurozone’s manufacturing
sector eased to 51.4 in December, confirming flash estimates. Germany’s factory PMI also dipped to 51.5
in December from 51.8 in November in line with expectations. By contrast, the UK manufacturing sector expanded
in December. Moreover, the PMI reading for the previous
month was upgraded. Nevertheless, the pound sterling cannot win
favor with investors amid lingering political jitters in the kingdom. Thus, the British currency shed almost 90
pips against its American rival and settled down at 1.2670. Demand for the US dollar revived after US
President Donald Trump assured Democrats to secure funding for a border wall. He invited them to a meeting at the White
House amid a partial government shutdown. Most experts insist that the US dollar has
completed its winning streak, being vulnerable to recent political developments and concerns
about a slowdown in the US economy. The greenback is likely to continue its decline
across the board in the short term.

Leave a Reply