The British pound continued its historic trend of starting the year on a weak note, marking the seventh consecutive year of losses on the first trading day after New Year’s Day.
Deutsche Bank (ETR:) Analysts noted that the pound fell more than one percent today, adding to a long-term pattern in which the pound has posted only three positive returns on its first day of trading in the past two decades.
The bank’s analysis shows that the pound’s performance is not isolated, as the euro against the US dollar () has shown a similar pattern, albeit slightly less pronounced. The movements in the cable, the term used for the currency pair, often correspond to the repricing of relative interest rates at the beginning of the year.
However, today’s interest rate movements were minimal, despite a downward revision to the UK manufacturing PMI and more favorable US unemployment benefits data.
Deutsche Bank attributed the pound’s additional underperformance to a “beta of technical breaks” last year, citing the euro’s fall from last year’s lows and the pound’s decline to multi-month lows .
The technical analysis shows that these breaks in key support levels have contributed to the downward pressure on sterling.
Looking ahead, Deutsche Bank found no strong pattern that would indicate whether the pound’s initial losses on the first day of trading would be reversed or continued in the following week.
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