GBP/EUR – Declines on Soft UK PMI Results
Prior to this week’s trade the British Pound strengthened considerably versus its major peers thanks to a relief rally amid easing ‘Brexit’ concerns. However, Sterling’s uptrend reached a plateau this week thanks to a combination of disappointing domestic data and renewed EU referendum uncertainty. Both the Manufacturing and Construction PMIs failed to meet with expected growth in April, with the former unexpectedly contracting on the month. This has piled a lot of pressure on the services sector to avoid a significant slowdown in economic growth during the second-quarter. The latest EU referendum opinion poll showed that both the ‘leave’ and ‘remain’ campaigns had an equal share of voter support. Many analysts now fear that the relief rally was overdone.
GBP/USD – Declines despite Reduced Fed Rate Hike Bets
Last week the Pound Sterling to US Dollar exchange rate erased its 2016 losses, with the US Dollar struggling against reduced Federal Reserve rate hike bets. However, as this week commenced the GBP/USD exchange rate softened as British data weighed on Sterling sentiment. Whilst the prospect of long-term delays to a Federal Reserve benchmark interest rate hike is still having a detrimental impact on demand for the US Dollar, risk-off trade and a resumption of Euro depreciation would likely result in marked ‘Greenback’ gains.
USD/GBP – Extends Gains on Positive US Services Output
Wednesday’s positive domestic data saw the US Dollar advance versus its major rivals. The ISM Non-Manufacturing/Services Composite bettered the median market forecast rise from 54.5 to 54.8, with April’s actual result reaching 55.7. This should improve the odds of a Federal Reserve rate hike within the next few meetings now that the Federal Open Market Committee (FOMC) decisions are more data driven.
EUR/USD – Advances despite Underwhelming Eurozone Data
Irrespective of disappointing domestic ecostats, the Euro managed to advance versus several of its currency rivals today. Whilst the Eurozone Composite PMI showed that growth was tepid in the early stages of the second-quarter, Euro-area growth still outpaced that of the UK and the US. As such, the shared currency advanced. Also providing the Euro with tailwinds is speculation that the European Central Bank (ECB) will avoid loosening monetary policy further in the near-term as current measures are given time to have a positive impact.