The British pound began the new year on a weak footing, continuing its historical trend of losses on the first trading day after New Year’s Day. This marks the seventh consecutive year where sterling has fallen on this day, a pattern that Deutsche Bank (ETR:DBKGn) analysts highlighted in their recent commentary.
The pound dropped by over one percent during the session, adding to a broader historical trend. According to Deutsche Bank’s analysis, sterling has achieved positive returns on the first trading day in only three of the past twenty years. Similar patterns have been observed in the Euro versus the U.S. dollar (EUR/USD), although the trend for the Euro is less pronounced.
Movements in the GBP/USD currency pair, often referred to as “Cable,” are frequently tied to adjustments in relative interest rates at the start of the year. Despite today’s limited activity in interest rate changes, other economic indicators contributed to the pound’s decline. These included a downward revision in the UK’s manufacturing PMI and stronger than expected U.S. unemployment claims data, which provided support for the dollar.
Deutsche Bank also pointed to technical factors exacerbating the pound’s underperformance. The bank noted a “beta of the technical breaks” from the prior year, referencing the pound’s decline to multi-month lows and the Euro’s drop to last year’s lowest levels. These breaks in key support levels have intensified the downward pressure on sterling, according to the analysis.
Looking ahead, Deutsche Bank found no consistent historical trend to suggest whether the pound’s initial losses on the first trading day of the year will persist or reverse in the days that follow. The lack of a clear pattern leaves the outlook for the pound uncertain as the market navigates the early days of 2025.
