The pound skyrocketed yesterday, falling just shy of $1.35 against the US dollar in response to renewed Brexit optimism.
Sterling starts today on mixed form. The GBP/EUR exchange rate is flat at €1.1459, while the GBP/USD exchange rate has fallen -0.3% to US $1.4049. The GBP/AUD exchange rate has risen 0.1% to AU$1.8272, the GBP/NZD exchange rate has climbed 0.2% to NZ$1.9287, and the GBP/CAD exchange rate has fallen -0.1% to C$1.7950.
The vital UK services PMI is set for release today. Read on to find out how the pound is likely to react…
What’s been happening?
Pound Sterling was left on soft form yesterday after the latest UK construction data revealed a surprise contraction in sector activity during March.
The Markit PMI unexpectedly dropped below the neutral score of 50 to hit 47, with the severe snow storms that battered the UK in recent weeks largely to blame.
Nonetheless, while the impact from those weather conditions may be temporary (although with British weather is too early to say that there won’t be any snow during the spring; or summer for that matter) markets were nonetheless disappointed to see sector productivity take a knock.
The GBP/EUR exchange rate therefore dipped below opening levels, with the euro also supported by positive domestic data.
The unemployment rate for the currency bloc fell to 8.5% - the lowest figure recorded since the financial crisis - and overall consumer price growth accelerated from 1.1% to 1.4%.
Meanwhile the GBP/USD exchange rate was able to register marginal gains after mixed US eco-stats were released in the afternoon.
While the ADP employment change report beat forecasts to show 241,000 people found employment during March, the ISM non-manufacturing composite index printed lower than expected, as did factory orders growth in February.
What’s coming up?
The pound could push significantly higher or lower today after this morning’s UK services PMI has been published.
Forecasts expect the index to weaken slightly to 54, which could see the Pound drop as, combined with the construction and manufacturing index for this month, it would suggest that the UK economy was on lacklustre form in the first quarter of the year.
The euro could remain firm after the release of today’s Eurozone retail sales data, which is expected to show a consistent pace of sales growth during February.
It’s not the biggest day for US data, but given the evolving dispute between the US and China it seems fitting that the US trade balance for February is released today.
Markets may react badly to a wider deficit not only because of the usual impact it has upon the current account, but also because President Donald Trump may use it as justification for further protectionist measures.
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)