Pound Resilient Despite Services Slowdown
Yesterday’s UK services PMI failed to impress, but that didn’t stop the Pound registering gains against several of the majors.
GBP/EUR and GBP/USD both ended the day in a stronger position despite the services measure tumbling from 53.8 to 53.2 – the worst result for 11 months.
The Pound largely held gains despite the release of a number of Brexit-related headlines – including one focused on a leaked report detailing plans to deter UK immigrants.
With UK data thin on the ground today, GBP is likely to be responsive to external developments.
Euro Struggles Ahead of ECB Decision
Although the UK’s services PMI revealed an 11-month low in service sector growth on Tuesday, the GBP/EUR exchange rate was unfazed. The Pound pushed back above the €1.08 level as the Eurozone’s services and composite PMI measures were negatively revised and retail sales stats showed a -0.3% dip in consumer spending.
With the European Central Bank (ECB) due to deliver its latest interest rate decision tomorrow, these figures did little to support hopes that the central bank will begin tapering quantitative easing in the near future.
Today’s German factory orders report also came in at 5.0% rather than 5.8%.
US Dollar Lower after Durable Goods Figure
Tuesday’s US durable goods orders report helped the Pound climb against the US Dollar. Durable goods orders fell -6.8% in July rather than the -2.9% initially estimated. However, there is potential for USD to climb this afternoon as the ISM services/non-manufacturing composite index is expected to improve from 53.9 to 55.5.
Bank of Canada Rate Decision Could Boost CAD Exchange Rates
The Canadian Dollar gradually lost ground to Sterling over the course of Tuesday’s trading session ahead of today’s Bank of Canada (BOC) interest rate decision. However, if the BOC is upbeat about Canada’s economic outlook and indicates that it will hike interest rates again in the near future, the Canadian Dollar could bounce higher this afternoon.
Disappointing Australian GDP Sends AUD Lower
The Australian Dollar declined overnight as second quarter growth figures for Australia fell short of forecasts. GDP printed at 0.8% quarter-on-quarter (rather than 0.9%) and 1.8% year-on-year – an annual result of 1.9% had been projected.
As the results are unlikely to inspire the Reserve Bank of Australia (RBA) to start tightening monetary policy, they left AUD exchange rates broadly weaker.
Tomorrow’s AiG performance of construction index could help the Australian Dollar recover losses if it improves on July’s figure of 60.5.
New Zealand Dollar Fails to Hold Dairy-Inspired Gains
An increase in dairy prices gave the New Zealand Dollar a little lift on Tuesday, but the GBP/NZD exchange rate swiftly recovered ground despite the UK’s less-than-impressive services PMI.
The next New Zealand data to be aware of is the nation’s manufacturing activity stat for the second quarter, due out tomorrow. An uptick in output would be NZD supportive.
Data Released Today
07:30 EUR Markit Germany Construction PMI (AUG)
08:10 EUR Markit Germany Retail PMI (AUG)
11:00 USD MBA Mortgage Applications (SEP 01)
12:30 USD Trade Balance (JUL)
14:00 CAD Bank of Canada Rate Decision (SEP 06)
14:00 USD ISM Services/Non-Manufacturing Composite (AUG)