Sterling
The Pound gave back some of its recent gains yesterday as UK economic optimism was tempered by a surprise deceleration in manufacturing output. March’s UK factory output PMI printed at a four-month low of 54.2, with consumer goods producers losing out as rising inflation started to bite. Analysts had expected a score of 55.0, which explains why demand for Sterling softened yesterday, but overall the report still featured sturdy output growth and a rise in job creation.
This morning’s construction PMI report, which makes up around 6% of UK economic output, is tipped to come in at 52.5, matching February’s score. However, markets are likely to overlook the construction numbers and place more significance on Wednesday’s service sector report, which accounts for over 70% of UK GDP and therefore has a more pronounced bearing on Bank of England rate expectations.
Euro
Sterling lost around half a cent to the single currency yesterday as encouraging data out of the Eurozone drove GBP/EUR down from a one-month high.
Holders of the Euro were pleased by news that unemployment in the currency bloc slid from 9.6% to a seven-year low of 9.5% in February. After a dreadful few years, the region’s labour market finally appears to be making progress. The Czech Republic (3.4%), Germany (3.9%) and Malta (4.1%) boasted the lowest scores, while the situation remained much more bleak in Greece (23%) and Spain (18%). The downshift in the Eurozone-wide figure means that unemployment is actually now below its average level since the creation of the bloc in 1999.
Also working in the single currency’s favour was a report showing that Eurozone manufacturing activity struck a six-year high in March. Boosted by 70+month highs in Germany and Italy, the indicator printed at 56.2, its highest level since April 2011.
US Dollar
‘Cable’ slipped back below longstanding technical and psychological resistance yesterday as British data disappointed.
The ISM US manufacturing index also showed mild signs of slowing, dipping from 57.7 to 57.2 in March. However, given the index is still way above the 50.0 mark that separates contraction from growth, the ‘Greenback’ was barely impacted by the report. This afternoon sees US factory order and durable goods orders data for February.
Canadian Dollar
The Pound to Canadian Dollar exchange rate remained flat through most of yesterday’s session as tumbling oil prices offset the disappointing UK PMI numbers. Crude weakened on news that Libyan oil output resumed following a weeklong disruption and this weighed on the commodity-sensitive ‘Loonie’. Libya’s Sharara field pumped out 120,000 barrels yesterday and should return to full output of 220,000 million barrels per day shortly.
Australian Dollar
Sterling rallied by around a cent versus the Australian Dollar at the start of the new week of trading, however, GBP/AUD swiftly gave up those gains during the London session and ended flat for the day. It seems that a dip in Australian factory output from 59.3 to 57.5 weighed on the ‘Aussie’, as did a contraction in retail sales down under, which disappointed forecasts of a +0.3% expansion.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate briefly touched a joint-three-month high yesterday but Sterling then went on to fall around -150 pips from its daily peak as underwhelming UK manufacturing figures prompted a bout of profit taking. Sentiment towards GBP/NZD during today’s session could hinge on whether the latest New Zealand dairy auction shows a rise or a decline in the value of the nation’s most important export.
Data Released
09:30 GBP Markit/CIPS UK Construction PMI (MAR) Medium 52.5
10:00 EUR Euro-Zone Retail Sales (YoY) (FEB) Medium 1.0%
14:30 EUR ECB President Draghi speaks in Frankfurt High
15:00 USD Factory Orders (FEB) Medium 0.9%
15:00 USD Durable Goods Orders (FEB F) Medium 1.7%