On February 3rd, a closely watched survey indicated that the UK manufacturing sector experienced one of its best months since the Labour Party came into power, as the industry gradually recovers from the impact of tax hikes and geopolitical instability. The S&P Global Manufacturing Purchasing Managers' Index (PMI) for January rose to 51.8, up from 50.6 the previous month and slightly above the preliminary estimate. This index has now remained above the critical 50-point mark that separates expansion from contraction for three consecutive months, signaling the sector is in an expansionary phase. Rob Dobson, Director at S&P Global Market Intelligence, stated, "The UK manufacturing sector started 2026 on a steady footing, showing encouraging resilience against a backdrop of escalating geopolitical tensions." Driven by increased export sales to Europe, the US, and China, new export orders for UK manufacturers improved for the first time in four years, pushing output growth to its fastest pace since last October. Manufacturing firms across all categories reported an increase in new orders.
Meanwhile, dragged down by persistently weak new orders, manufacturing activity in the Eurozone contracted for the third consecutive month in January. The final Eurozone Manufacturing PMI for January was revised up to 49.5, higher than December 2025's 48.8, but still remained below the 50-point threshold for the third month in a row, indicating ongoing contraction. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented, "There has been some progress in manufacturing, but the pace is slow." The manufacturing output index, a key component of the overall PMI, rebounded to 50.5 in January from 48.9 in December 2025, moving back above the 50-point line and indicating a modest increase in output. However, new orders declined for the third month in a row. Although the rate of decline in new orders eased in January compared to December 2025, it continued to weigh on the overall index. Input cost inflation accelerated at its fastest pace in three years, primarily fueled by rising energy prices. However, manufacturers had limited pricing power, as output prices remained largely unchanged from the previous month, squeezing profit margins.
Key data to watch today includes the US Durable Goods Orders Monthly Revision for December, US Factory Orders Monthly for December, and US JOLTs Job Openings for December. Additionally, the Reserve Bank of Australia's interest rate decision and monetary policy statement, due around midday, require close attention.
USD Index The US Dollar Index climbed higher yesterday, reaching a fresh 6-day peak, and is currently trading around 97.50. The ongoing market reaction to the nomination of Kevin Warsh, known for his hawkish leanings, as Fed Chair, coupled with diminishing expectations for a Federal Reserve rate cut, are the primary factors supporting the dollar's sustained ascent. Furthermore, better-than-expected US manufacturing data released during the session also provided some underpinning for the currency. Today, focus is on resistance near the 98.00 level, with support found around 97.00.
EUR/USD The Euro declined yesterday, breaking below the 1.1800 mark to hit a 6-day low, and is currently trading around 1.1810. The continued rebound in the US Dollar Index, supported by cooled Fed rate cut expectations and robust economic data, was the main factor pressuring the Euro lower. However, overall positive economic data from the Eurozone released during the session, alongside expectations that the European Central Bank's rate-cutting cycle is nearing its end, limited the pair's downside. Today, resistance near 1.1900 is worth watching, with support situated around 1.1700.
GBP/USD The British Pound moved lower yesterday, refreshing a 6-day low, and is currently trading around 1.3680. The persistent rebound in the US Dollar Index, fueled by factors including diminished Fed rate cut expectations and strong US economic data, exerted downward pressure on the Sterling. Nonetheless, encouraging UK economic data released during the session and expectations that the Bank of England will hold rates steady this week curbed further losses for the currency pair. Today, attention turns to resistance near 1.3750, while support lies around the 1.3600 level.
Comments