The pound trended broadly higher on Monday ahead of the publication of the UK’s Spring Budget later in the week.
Meanwhile, trade in Sterling is mixed this morning, with GBP/EUR flat at €1.1688 and GBP/USD dipping to $1.2671. GBP/CAD is rangebound at CA$1.7233, while GBP/AUD and GBP/NZD tick up to AU$1.9546 and NZ$2.0850, respectively.
Coming up, will a dip in US service sector growth drag on the US dollar today?
What’s been happening?
The pound got off to a positive start this week amid growing confidence ahead of the unveiling of Chancellor Jeremy Hunt’s budget on Wednesday.
GBP exchange rates firmed on recent reports which suggest the Chancellor’s planned tax cuts will be fairly modest in scope, with Hunt promising they will be ‘prudent and responsible’.
This has helped to allay fears of a massive unfunded tax giveaway which economists feared could have triggered similar chaos to that seen in the wake of Liz Truss’s 2022 mini-budget.
Meanwhile, the US dollar traded without strong directional bias on Monday amid the absence of any market-moving data. The limited movement also came despite an uptick in US Treasury yields and a cautious market mood.
Finally, the euro was also rangebound yesterday, with EUR investors reluctant to make any aggressive bets ahead of the European Central Bank’s (ECB) interest rate decision later in the week.
What’s coming up?
Looking ahead, the spotlight today will be on the publication of the ISM services PMI later this afternoon.
The index is forecast to report a moderation of growth in the US services sector last month. A modest slowdown in activity may weigh on the US dollar today, although another stronger-than-expected reading could catapult USD exchange rates higher.
Also of note to USD investors will be the latest US factory orders release. An expected plunge in order growth in January could act as a headwind for the ‘greenback’.
In the meantime, this morning will see the publication of February’s finalised services PMIs from both the UK and Eurozone.
However, barring any major divergence from the preliminary figures, their impact on the pound and euro are likely to be negligible, with both GBP and EUR investors focused on events later in the week.
