The GBP/USD plunged on Friday to its lowest level since August 2013 after a report showed U.K. manufacturing growth unexpectedly slowed in December. This raised concerns for investors about the timing of the next interest rate increase by the Bank of England.
The U.K. economy continues to grow but at a much slower pace than expected. The slow down in manufacturing along with below expectations inflation likely means the central bank will further delay an expected interest hike. According to Markit Economics, U.K. manufacturing PMI fell to 52.5 from a revised 53.3 in November. Economists were look for 53.6.
The EUR/USD plunged to its lowest level in 2 ½ years and appears to be well on its way to challenging the June 7, 2010 bottom at 1.1876. The catalyst behind today’s sell-off was triggered by comments from European Central Bank President Mario Draghi. He said, “The risk that we do not fulfill our mandate of price stability is higher than six months ago.
Traders interpreted this to mean the central bank is poised to begin implementing quantitative easing. This is bearish for the Euro because it means more money will be pumped into the economy.
February Comex Gold prices broke sharply on Friday. The sell-off was triggered by a rally in the U.S. Dollar. The rally in the dollar made gold more expensive to foreign traders, thus lowering demand.
February Crude Oil tested a new low near $50.00 per barrel. After several days of consolidation, it looks as if crude oil is getting ready to begin another leg down. Unless OPEC or U.S. drillers start cutting back on production, the next major bottom may be several months away and perhaps when crude oil is well below the psychological $50.00 level.
Today’s U.S. economic numbers weren’t that impressive either. Final Manufacturing PMI came out below expectations at 53.9. ISM Manufacturing was also below the estimate at 57.6. Construction Spending was reported at -0.3%, below the pre-market guess of 0.4%. Finally, ISM Manufacturing Prices came out at 38.5. Traders had priced in a reading of 44.5.