GBP/EUR – Has Manufacturing PMI Set Template for Later Data Releases?
The Pound Euro exchange rate is advancing, although gains remain muted and Sterling is on poor form against many of its other peers. The latest UK data has been mixed, with Markit’s manufacturing PMI for February falling further-than expected. Analysts held a consensus view that the index would drop from 55.9 to 55.6, but it instead fell to 54.6. This takes the index down to a three-month low, yet even so the industry continues to perform near a two-and-a-half-year high, softening the negative impact of the data.
GBP/USD – Falls as Markets Warm on US Dollar Following Donald Trump Speech
Positive figures for mortgage approvals and consumer credit were not enough to prevent the Pound from falling against the US Dollar. Consumer credit was £16 million higher-than-expected at £1415 million, while the number of mortgage approvals clocked in at 69.93k against expectations of 68.65k. However, investors are worried that the worse-than-expected fall in the manufacturing index is an indication of the performance of other sectors of the economy during February. A similar fall in the services index would cause notable concern, given that economists have forecast UK GDP will slow this year.
USD/GBP – Trump Provides Enough Stimulus Hints to Boost US Dollar
Donald Trump’s speech to Congress was something of a disappointment as far as markets were concerned, but not to the extent that it prompted a mass sell-off. Markets were impressed with the Presidential tone of the speech, which saw Trump largely sticking to his prewritten remarks. He announced that he would be asking Congress to approve legislation to deliver US$1 trillion in economic stimulus, but no other details were forthcoming. This was enough to see bets of an interest rate hike from the Federal Reserve this month rocket up to 80% – more than double the odds seen before the speech.
EUR/USD – Euro Mixed as Data Fails to Provide Support
Eurozone data hasn’t been positive enough to stem EUR/USD exchange rate losses today. Finalised versions of the February manufacturing PMIs from Markit have largely disappointed forecasts. On the other hand, German unemployment fell by more than was expected, dropping -14k instead of -10k. This was not a strong enough drop to lower the unemployment rate from 5.9%. Overall the data failed to notably change the short-term outlook for the Euro.