As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Weak UK PMIs set to drag pound down
- Euro under pressure ahead of Eurozone inflation figures
- Underwhelming US manufacturing growth limits US dollar appeal
Pound vulnerable to construction sector slowdown
As the UK manufacturing PMI unexpectedly fell into a state of contraction yesterday confidence in the economic outlook has diminished.
The pound could face further pressure this morning if May’s construction PMI also shows a slowdown on the month.
While the construction sector avoided stagnation in April any fresh deterioration could see the sector also slide into contraction.
Although construction accounts for a fairly small percentage of the UK gross domestic product, weakness here could still raise concerns over the health of the economy in the second quarter.
Euro set for decline on Eurozone inflation data
Fresh weakness could be in store for the euro this morning if May’s Eurozone consumer price index data shows inflation falling back as forecast.
Even though April’s solid uptick in price pressure was attributed to distortion around the Easter holiday any decline could still weigh heavily on EUR exchange rates.
With the European Central Bank (ECB) already looking set to maintain a dovish policy bias in the coming months a weaker inflation reading would leave investors with little incentive to favour the euro.
If the CPI data beats forecasts, though, this may offer the single currency a temporary boost against its rivals.
Weakening manufacturing sector weighs on US dollar
After yesterday’s ISM and Markit manufacturing PMIs pointed towards a loss of momentum the mood towards the US dollar soured.
Demand for the US dollar could diminish further this afternoon on the back of April’s factory orders figure, with investors anticipating a decline on the month.
Fresh evidence of a deteriorating manufacturing sector would leave USD exchange rates exposed to selling pressure, suggesting that ongoing trade tensions are weighing on the US economy.
Unless factory orders show resilience in the face of the escalating US-China trade dispute the potential for US dollar gains seems limited.
Tuesday, 4th June 2019
09:30 GBP Construction PMI
10:00 EUR Eurozone Consumer Price Index
15:00 USD Factory Orders
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)