Forex Weekly Round Up 5 January 2015 – 9 January 2015

Here is our market summary for the week commencing 5 January 2015.

The Eurozone ended 2014 with its worst quarter for over a year. The continuing downturn in France and Italy, along with a softening performance by Germany has hampered growth in the Eurozone. Continued fears cheap oil will tip the region into deflation fuelled calls for the European Central Bank to stimulate prices in the economy. The Euro hit a nine-year low against the Dollar, after the decrease in German manufacturing.

Growth in the UK service sector was slower than had been predicted, giving weight to the argument that the economy lost upward momentum at the end of 2014. The Markit Purchasing Managers’ Index (PMI) fell to 55.8 from 58.6 in November – the lowest since May 2013. This loss of momentum means there is increased uncertainty and some economists are commenting the upturn is too fragile to support higher interest rate. This coupled with lower inflation and falling oil prices means interest rate increases are unlikely in 2015.

On Wednesday 7 January, the US Dollar reached its lowest level against the Pound since July 2013. With the increasing uncertainty in the Eurozone, and Greece in particular, investors turned to the Dollar as a safe haven. On Thursday 8 January, we learned US private firms created 241,000 new jobs in December, 15,000 more than predicted. Sliding oil prices have helped the US narrow its trade gap. The US trade deficit hit an 11-month low of $39bn in November, compared to estimates of $42bn.