2020 was a difficult year for not just the manufacturing sector but for the whole UK economy, with the global coronavirus pandemic disrupting almost every industry in some way and resulting in uneven demand for manufacturers throughout the year.
- Euro set for further losses on Eurozone manufacturing sector contraction
- Bank of England decision to drive pound volatility
- US dollar looks for boost if factory orders rebound
Weak Eurozone manufacturing sector to drag on euro
Confirmation that the Eurozone manufacturing sector continued to struggle in April could see the euro extending its losses today.
The finalised Eurozone manufacturing PMIs are forecast to remain within contraction territory, highlighting the continued weakness within the economy of the currency union.
As long as signs point towards the Eurozone facing continued economic pressure in the second quarter support for the euro is unlikely to pick up.
However, any positive revision to the manufacturing sector data could offer a modest boost to EUR exchange rates this morning.
Pound volatility likely after Bank of England announcement
No change in interest rates is expected at today’s Bank of England (BoE) policy announcement, given the degree of Brexit-based uncertainty that continues to cloud the economic outlook.
Even so, if BoE policymakers show greater signs of dovishness this could knock GBP exchange rates off their recent bullish run.
Evidence that the BoE has less confidence in the underlying health of the UK economy, thus limiting the prospect of future interest rate hikes, the mood towards the pound could sour.
On the other hand, signs that the central bank maintains a hawkish policy bias may encourage the pound to extend its gains further.
Factory orders rebound to offer US dollar boost
Confidence in the strength of the US economy has continued to falter this week, with the ISM manufacturing index weakening further than forecast yesterday.
This has left USD exchange rates on a generally weaker footing as the odds increasingly point towards growth slowing in the second quarter.
Even so, forecasts point towards a positive showing from this afternoon’s US factory orders data, which may improve the appeal of the US dollar.
A solid rebound in orders on the month after March’s contraction could encourage a greater sense of optimism over the economic outlook, boosting USD exchange rates.
Thursday, 2nd May 2019
09:00 EUR Eurozone Manufacturing PMI
12:00 GBP Bank of England Rate Decision
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)