Above Forecast UK Services PMI Boosts Pound Sterling Exchange Rates: GBP Rises on Signs of Resilient Economy

Pound Sterling Exchange Rates Boosted by Above Forecast Services PMI

A better-than-expected UK services PMI for February gave Pound Sterling a boost across the board yesterday.

The index was expected to inch higher to 53.3 from January’s score of 53, but instead climbed to a four-month high of 54.5. It now seems that the slowdown seen in January PMIs may have been a blip rather than the start of a downturn, which gave markets the confidence to pile back into the Pound.

Bank of England (BoE) Chief Economist Andy Haldane is set to give a speech today in London after the close of trading, which could keep the Pound on muted form as markets await his address.

Weak Eurozone Data and Italian Political Uncertainty Push GBP/EUR Higher

GBP/EUR registered choppy gains yesterday, with the Euro showing surprising resilience considering the headwinds facing it.

Finalised services and composite PMIs for Italy, France and the Eurozone as a whole were revised lower compared to initial estimates and the Sentix measure of investor confidence dropped from 31.9 to 24.

Italian politics was also weighing on EUR after the weekend election which saw Eurosceptic and far-right parties potentially facing months of negotiations in order to form a coalition that gives a majority in Parliament.

Eurozone February retail PMIs and the German construction index could give the Euro a boost today if they show strong retail activity.

Better-than-Expected US ISM Composite Index Slows GBP/USD Gains

The GBP/USD exchange rate made minor gains yesterday, although the Pound’s advance was curtailed by the mid-afternoon US ISM non-manufacturing index for February.

The measure was expected to fall from 59.9 to 59, but instead only slipped to 59.5; still a very respectable score. However, the US Dollar was undermined to some extent by President Donald Trump’s determination to levy trade tariffs in an attempt to protect American industry.

A speech from Federal Reserve official William Dudley is the most impactful development on the economic calendar today, although the US Dollar could see movement if President Trump makes any more comments regarding trade tariffs.

GBP/CAD Surges as Trump Targets NAFTA in New Tweets on Trade

The GBP/CAD exchange rate climbed sharply yesterday, with the Canadian Dollar weakened by a lack of appetite for risk assets, and new Tweets from Donald Trump in which the President again criticised the North American Free Trade Agreement (NAFTA).

Fears over a trade war are likely to keep the Canadian Dollar on soft form today. The only domestic data on offer is the low-impact Ivey purchasing managers index for February.

Approach of RBA Policy Announcements Gives GBP/AUD the Edge

GBP/AUD registered solid gains yesterday, with markets staying away from the Australian Dollar in anticipation of the latest Reserve Bank of Australia (RBA) monetary policy announcements, which were delivered early this morning.

Demand for AUD was also sapped by incoming US trade tariffs of 25% on imports of steel; Australia accounts for around half of the world’s annual iron ore exports, which is a key steelmaking ingredient.

The Australian Dollar could be on muted form during today’s European session, given that RBA Governor Philip Lowe is set to give a speech in Sydney tonight.

Cooling Global Risk-Appetite Helps GBP/NZD Exchange Rate to Advance

Weak global risk appetite weighed on the New Zealand Dollar yesterday, allowing the GBP/NZD exchange rate to make gains.

The results of the latest global dairy trade auction could significantly boost or undermine the New Zealand Dollar this afternoon, depending on whether the average final price of milk products rises or falls.

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons