Sterling
The Pound failed to rally on a surprisingly strong construction print on Friday, with traders more concerned by new polls putting Labour’s Jeremy Corbyn within touching distance of Conservative Theresa May.
The construction PMI printed at 56.0, its highest level since December 2015 and much higher than forecasts of 52.7. A stream of new residential projects drove the upbeat result, while civil engineering continued to flourish. However, Sterling barely responded to the report, which only accounts for around 6% of British GDP. We could see a little more movement if today’s service sector account also impresses, as tertiary output makes up over 70% of domestic growth. But election polls are still likely to dominate.
Following the devastating attack in London on Saturday evening the Pound opened a little bit lower this week as political tensions heightened.
Euro
The Pound to Euro exchange rate skidded to a new two-and-a-half-month low on Friday as polling continued to point to a tight election on June 8.
Ipsos MORI’s latest poll put the Tories ahead by just 5 points, indicating that Theresa May’s campaign is floundering, having led by as much as 20 points less than a month ago. Ipsos MORI said that May was losing support among middle aged and female voters, possibly as a result of her U-turn on the so-called dementia tax. News that Conservative MP Craig Mackinlay was being charged for making false claims about his campaign spending in 2015 added to the party’s problems.
As has been the case in recent weeks, the Pound stumbled on polls suggesting that Theresa May might not get the strong majority she hoped would strengthen her hand in Brexit negotiations.
US Dollar
Although Sterling was impacted by new opinion polls on Friday, the Pound managed to avoid sustaining any lasting losses versus the US Dollar due to a disappointing US non-farm payroll report.
The latest NFP showed job creation of just 138,000 in May, down on estimates of 182,000. Wage growth also underwhelmed, printing at 2.5% rather than the median market consensus of 2.6%. Traders said the softer-than-anticipated figures were unlikely to prevent the Federal Reserve from hiking rates later this month. But analysts noted the probability of another dose of monetary tightening soon after had retreated due to the dud figure.
US President Donald Trump’s decision to pull out of the Paris climate change pact prompted fury from global leaders and environmental groups, but the controversial move had little impact on GBP/USD trading patterns.
Canadian Dollar
The Pound to Canadian Dollar exchange rate traded within a tight range on Friday. The value of Canada’s biggest earning export, crude oil, dropped by around 1% due to fears that Trump’s decision to withdraw from the climate accord would lead to more drilling south of the border. The ‘Loonie’ pulled back a little in response to the downtrend in crude, which has been plagued by oversupply worries for a few years now.
Australian Dollar
Sterling lost out on around 150 pips versus the Australian Dollar on Friday as traders invested in the higher-yielding ‘Aussie’ ahead of this week’s UK general election. With opinion polls increasingly pointing to a tight result, perhaps even a hung parliament, demand for the Pound has dropped due to concerns that the Brexit process could be thrown into disarray by political uncertainty. However, in the long run a Labour victory would likely lead to a ‘softer’ Brexit with Britain retaining access to the EU single market. Going forward, this could actually give Sterling a boost.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate tumbled by around two cents on Friday as election jitters continued to drive Sterling lower. Upbeat UK construction data failed to give the UK currency a lift but we could see a turnaround in fortunes once the uncertainty of the upcoming election is concluded.
Data Released
09:30 GBP Markit/CIPS UK Services PMI (MAY) Medium 55
15:00 USD ISM Services/Non-Manufacturing Composite (MAY) High 57.1
15:00 USD Durable Goods Orders (APR F) Medium -0.5%