Sterling rallied sharply after a surprisingly strong release of manufacturing PMI. The two currencies though that took the harshest beating at the open of the new year were the Swiss franc and Aussie dollar. The reasons behind the selling were different, but heavy losses were seen throughout the session.

Sterling

Sterling rallied sharply after a surprisingly strong release of manufacturing PMI. Expansion in the manufacturing sector jumped to levels not seen in 16 years. The news helped to ease concerns that the VAT increase and government spending cuts were going to destabilise growth. Furthermore the Bank of England announced that mortgage approvals rose unexpectedly, while Nationwide said its house price survey saw a surprising increase.

US dollar

The dollar took back losses seen at the start of the week. Stronger than expected economic data as well as the release of the Fed’s minutes provided the dollar with further support. Factory orders came in at 0.7 per cent verses an expected decline. The data continues to suggest that a US manufacturing led recovery is taking place.

Euro

Little attention was given to the French consumer confidence figures which tumbled alongside weaker than expected employment figures out of Germany. The data did support the rather negative view markets were taking on the euro.

Japanese yen

The Japanese yen starts with small gains coming on the back of a heavy sell off in commodity markets. Local Japanese investors are likely unwinding carry trade positions after a steep decline in commodity prices was seen.

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