The Pound has recorded continued gains against the Euro and US Dollar today, respectively rising to 1.17 and 1.24.
While UK news has mainly consisted of the earlier services data, developments in the US have raised demand for Sterling.
In particular, Fed Bank of Richmond President Jeffrey Lacker has unexpectedly resigned, following evidence that he leaked sensitive information in 2012.
This has left a void among Fed policymakers, which has raised concerns that Donald Trump could forcibly place a new policymaker of his choosing into the central bank system.
The US Dollar has dropped on the news, making Pound trading more viable as a consequence due to its safer status.
[First published 10:13, April 5th, 2017]
While predictions had been for a minor rise in March from 53.3 to 53.5, the actual result showed a climb to 55.
This prevented a hat trick of PMI declines after earlier manufacturing and construction slowdowns. Offering a cautious take on the news was Markit Chief Business Economist Chris Williamson;
‘The relative weakness of the PMI survey data compared to that seen at the turn of the year suggests the economy will have grown by 0.4% in the first quarter, markedly lower than the 0.7% expansion seen in the fourth quarter of last year’.
The Euro has been tight against the Pound and US Dollar today, mainly due to Tuesday’s French election debate. Although far-right and anti-Euro candidate Marine La Pen was under fire from all sides, polls still failed to reassure traders of future French stability.
While central candidate Emmanuel Macron was considered the ‘winner’ in some polls, radical far-left contender Jean-Luc Melenchon was also estimated to have been highly convincing.
Eurozone data has shown rises in composite and services PMIs, with services hitting its best level in almost six years.
On a fairly still day for currency trading, the US Dollar has trended narrowly against the Pound and Euro.
The US trade deficit fell by more than expected on Tuesday, but any gains from this have been eroded by incoming US political events.
The main issue has been a meeting between Donald Trump and Chinese President Xi Jinping. While Trump has taken a hardline stance against Chinese trade and called climate change a ‘Chinese creation’, it remains to be seen which of the two global leaders will emerge dominant from the meeting.
If Trump appears to be burying the hatchet with a previously established rival, a further drop in confidence over his commitment and leadership is possible.
The last major UK announcement this week will be Friday’s trade balance figures, covering February.
Previously, a -1.97bn deficit figure was recorded. The Pound could be boosted if this stat drops further.
Also due on Friday will be UK construction and production figures. These are predicted to show a minor dip in construction but major rises in industrial and manufacturing production.
Euro movement could come on Thursday from the Eurozone-wide retail PMI, as well as from European Central Bank (ECB) meeting minutes.
In the latter case, the ECB minutes may alarm traders if they show dovishness among policymakers. The likely tone, however, is that the central bank will be cautious in most areas due to the ongoing French election process.
Three major US announcements are due today, starting with March’s Adp employment change. Compared to a previous rise of 298k employed, a smaller 187k figure is forecast, which may still raise USD demand.
Following this will be the ISM non-manufacturing PMI, which is forecast to dip slightly from 57.6 to 57 points.
The last daily release will be the Federal Reserve’s minutes for March. A number of Fed officials have recently advocated at least two more interest rate hikes in 2017; if the minutes confirm this outlook then the US Dollar could rally going into Thursday.
Current Interbank EUR GBP USD Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.16 and the Pound to US Dollar (GBP USD) exchange rate was trading at 1.24.
