The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Trade in Sterling is mixed at the start of this week, with GBP/EUR steady at €1.1951 and GBP/USD subdued at $1.2937. GBP/CAD is buoyed at C$1.7184, while GBP/AUD and GBP/NZD have rallied to AU$1.9618 and NZ$2.0504 respectively.
Looking to the week ahead, GBP exchange rates may face some headwinds as Brexit returns to the spotlight.
What’s been happening?
The pound pushed higher at the end of last week’s session in response to some surprisingly robust PMI figures.
IHS Markit reported that the UK’s private sector maintained its momentum in February, with business activity continuing to rise at its fastest pace since September 2018.
The upbeat PMI figures resulted in a notable improvement in Sterling sentiment on hopes they point to the UK economy returning to growth at the start of 2020.
Tim Moore, Associate Director at IHS Markit, said:
‘The recent return to growth signalled by the manufacturing and services PMIs provides a clear indication that the UK economy is no longer flat on its back, with our GDP nowcast pointing to 0.2% growth through the first quarter of the year.’
The euro also firmed on Friday on the back of the Eurozone’s own PMI figures. EUR investors were particularly impressed by Germany’s manufacturing PMI as it leapt to a 13-month high.
Meanwhile, the US dollar’s bullish streak came to an end on Friday as the latest US PMI figures painted a worrying picture, with the US private sector reporting its first contraction of growth in three years.
What’s coming up?
Kicking off this week’s session we have the publication of Germany’s IFO business climate index.
This could drag on the euro this morning as economists forecast it will show German business confidence weakened this month, likely as a result of ongoing concerns over the coronavirus outbreak.
For GBP investors the focus this week is likely to be on potential Brexit headlines as markets grow increasingly jittery ahead of the start of UK-EU trade negotiations next month.
Finally, in additional to further coronavirus developments, the spotlight for USD investors this week will be the latest US durable goods orders, where a sharp slump in goods orders in January is likely to weigh on the US dollar.
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)