A -2.6% monthly GDP contraction weighed heavily on the pound as worries over the UK’s economic outlook picked up again.
Sterling appears to be consolidating these gains this morning, with GBP/EUR flat at €1.1096 and GBP/USD stable at $1.2474. GBP/CAD is flat at C$1.6911, while GBP/AUD and GBP/NZD hold steady at AU$1.7978 and NZ$1.9111 respectively.
Looking ahead, could we see the pound push higher again today if the UK’s latest services PMI is revised higher?
What’s been happening?The pound trended higher yesterday as a positive market mood continued to buoy the appeal of the increasingly risk-sensitive currency.
This allowed Sterling to offset concerns over slow progress in Brexit trade talks. The latest round of negotiations concluded with the UK’s chief negotiator David Frost warning of ‘significant differences’ between the two sides, while his EU counterpart Michel Barnier said the UK needed to ‘better understand and respect’ the bloc’s position.
The positive market mood was partly attributed to a bumper US payroll reading, which saw US employment growth surge a whopping 4.8 million in June against a forecast of 3 million.
However, this failed to lift the US dollar which was undermined by a drop in safe-haven demand and concerns June’s jobs data may already be dated given the recent flare ups in US coronavirus cases.
Meanwhile, the euro remained mostly rangebound through Thursday’s trading session following on from the Eurozone’s stronger-than-expected employment figures.
What’s coming up?Turning to today’s session, the focus for GBP investors will be on the publication of the UK’s latest PMI figures.
In June’s initial estimate the UK’s services index printed at 47, just below the 50 market which denotes the point between growth and contraction.
However, the preliminary figures were posted in mid-June just as non-essential shops in the UK were reopening and as such could be revised higher, providing a boost to the pound.
Across the channel, the Eurozone’s own services PMI will be in the spotlight. Will an upward revised services PMI offer some support to the euro today?
Finally, with US markets closed for the 4 July weekend, trade in the US dollar is likely to be thin today, leaving the currency vulnerable to additional losses if market sentiment continues to improve.
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)