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- Pound vulnerable to construction sector slowdown
- Solid Eurozone producer price index may boost euro
- US Dollar looks to extend gains on factory orders data
Underwhelming construction PMI may add to pound weakness
After Friday’s disappointing UK manufacturing PMI the pound could be in for further weakness today if the corresponding construction sector data also disappoints.
Any indication that the construction sector also started 2019 on a weaker footing could weigh heavily on GBP exchange rates this morning.
While construction has a limited impact on the UK gross domestic product further evidence of an economic slowdown would still dent the appeal of the pound.
A month of stronger sector growth, meanwhile, is unlikely to be enough to reverse the recent weakness of GBP exchange rates.
Euro looks for support on Eurozone producer price index
Following on from last week’s underwhelming Eurozone inflation data the euro is looking for support on the back of December’s producer price index figures.
If producer prices accelerate as forecast on the year this could encourage hopes that inflationary pressure within the currency union is still building.
On the other hand, any easing in producer prices is likely to add to the case for the European Central Bank (ECB) to leave interest rates on hold for the foreseeable future.
Lingering worries over the health of the Italian economy may also help to keep the single currency on the back foot today.
Factory orders rebound to extend US dollar gains
With confidence in the health of the US economy restored USD exchange rates could continue to push higher over the course of the day.
Forecasts point towards a rebound in November’s factory orders data this afternoon, reversing some of the previous month’s sharp -2.1% contraction.
A stronger performance here would add to the bullish mood of the US dollar, even though the full economic impact of the recent government shutdown is yet to be seen.
If factory orders show another contraction, however, USD exchange rates may come under renewed pressure.
Monday, 4th February 2019
09:30 GBP Construction PMI
10:00 EUR Eurozone Producer Price Index
15:00 USD Factory Orders
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