Pound firms as UK services PMI revised higher

The pound strengthened on Tuesday as the UK’s latest services PMI was revised higher in its final print.

Meanwhile, Sterling is struggling to attract support so far this morning, with GBP/EUR flat at €1.1993 and GBP/USD subdued at $1.3055. GBP/CAD is rangebound at C$1.6330, while GBP/AUD and GBP/NZD dip to AU$1.7210 and NZ$1.8769, respectively.

Looking ahead, will some hawkish FOMC minutes underpin demand for the US dollar today?

What’s been happening?

The pound firmed yesterday, with the currency being bolstered by the release of UK’s latest PMI report.

March’s finalised services PMI was revised up from 61 to 62.6, rising from 60.5 in February and reporting the service sector’s strongest expansion of growth in nine months.

This uptick in Sterling was further supported by the prevalence of a risk-on market mood.

The euro, meanwhile, was left on the defensive on Tuesday as the outrage over Russia’s alleged atrocities in Bucha and other towns around Kyiv continued to cast doubts over future peace talks, while EUR investors were also unnerved by suggestions the EU will impose sanctions on Russian energy exports.

At the same time, risk-on flows undermined demand for the safe-haven US dollar yesterday, with a weaker-than-expected ISM non-manufacturing PMI also limiting demand for the ‘greenback’.

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest factory orders release.

February’s data reported a much larger-than-expected contraction in order growth, which could further dampen the appeal of the euro today as it likely stokes concerns over the German economy in the first quarter.

The single currency could face additional pressure through the day as the EU may announce additional sanctions on Russia following a meeting of EU ambassadors.

In the spotlight for USD investors today will be the publication of the minutes from the Federal Open Market Committee’s (FOMC) March policy meeting. A hawkish consensus could bolster expectations for a half-percent increase in interest rates from the Federal Reserve next month and strengthen the US dollar in the process.

Meanwhile, in the absence of any notable GBP data the pound may struggle to attract support today, particularly if the national insurance rise places the focus back on the UK’s cost of living crisis.