British Pound Continues Decline on First Trading Day of the Year

The British pound continued its historical downward trend, recording a loss for the seventh consecutive year on the first trading day after the New Year. Deutsche Bank analysts noted that the pound fell by more than one percent today and indicated a long-term trend, stating that it has provided positive returns only three times on the first trading day in the last twenty years.

According to the bank's analysis, the pound's performance is not isolated; the Euro/USD exchange rate also shows a similar, albeit slightly less pronounced, trend. Movements in the term "Cable," which refers to the GBP/USD pair, are generally consistent with the repricing of relative interest rates at the beginning of the year.

However, despite the downward revision of the UK's manufacturing PMI and the more positive unemployment claims data from the US, today's interest rate movements remained minimal. Deutsche Bank characterized the additional performance decline of the pound as the "beta of technical breaks" from last year, referring to the euro's dip to last year's lows and the pound's drop to multi-month lows.

Technical analysis shows that breaks at these significant support levels have contributed to the downward pressure on the pound. Looking ahead, Deutsche Bank found no strong trend indicating whether the initial losses experienced by the pound on the first trading day would reverse or continue in the following week.