Weak UK Manufacturing PMI Undermines Pound Sterling Exchange Rates after Revealing Slowest Quarterly Expansion in a Year

Pound Sterling Weakened as Manufacturing Posts Slowest Growth in 12 Months

Pound Sterling was left on soft form yesterday after the latest Markit manufacturing PMI failed to impress. Although the index did not drop as far as expected – actually climbing higher by 0.1 points considering the previous month’s reading was downgraded – the PMI, when combined with January and February’s readings, shows that manufacturing grew at its slowest quarterly pace in a year at the start of 2018.

The UK construction PMI is due for release today. This is not as impactful as the manufacturing index, given the relatively small contribution to UK GDP from the construction industry, but it could still have a noticeable impact upon the Pound.

GBP/EUR Exchange Rate Pushed Higher as EUR Slumps on Poor Eco-Stats

Despite its weakness elsewhere, the Pound was able to make gains versus the Euro thanks to a poor run of Eurozone data. German retail sales disappointed with a surprise -0.7% contraction month on month in February, leaving the year-on-year sales growth at 1.3% instead of the 2.4% predicted.

Additionally, the manufacturing PMIs for Italy and Germany showed worse-than-expected results for March, giving markets little reason to favour the Euro yesterday.

The GBP/EUR exchange rate could be under pressure today, as the upcoming Eurozone unemployment and inflation figures are expected to move in positive directions.

GBP/USD Holds Opening Levels as Diminishing Trade War Fears Coax Investors Out of Safe US Dollar

The US Dollar wasn’t performing particularly well yesterday either. Markets were clearly in a risk-off mood, fuelling strong gains for commodity currencies and leaving the more stable assets out in the cold.

Prospects of a global trade war initiated by the US were weakening, but this just meant investors had the confidence to leave the safe-haven ‘Greenback’ and chase higher yields.

The ISM non-services composite index could cause some USD volatility today, although markets may be more interested in speeches from Federal Reserve officials James Bullard and Loretta Mester.

GBP/CAD Exchange Rate Tumbles as NAFTA Agreement Hopes Boost Canadian Dollar

The GBP/CAD exchange rate tumbled -0.7% yesterday, with the Canadian Dollar boosted by a revival in market risk appetite. The Canadian Dollar was further supported by hopes that progress is being made in the renegotiations of the North American Free Trade Agreement (NAFTA).

A Mexican official claimed that trade ministers from the US, Canada and Mexico would meet in the coming days to discuss the issue further, raising hopes that a suitable agreement can be forged that saves the deal from collapse.

GBP/AUD Registers Strong Losses despite Cautious Outlook from Reserve Bank of Australia

Although risk appetite was strong yesterday, the Australian Dollar was not quite able to push the Pound as far into negative territory as its commodity-correlated brethren. The GBP/AUD exchange rate still dropped -0.5%, but this likely would have been considerably more were it not for the latest Reserve Bank of Australia (RBA) monetary policy statement.

Policymakers once again left interest rates frozen, marking the 20th month of static borrowing costs, and warned over the extent of unemployment and the impact of rising borrowing costs in the United States.

The approach of tonight’s AiG performance of services index may work to slow Australian Dollar appreciation today, although if risk appetite continues to flourish then the GBP/AUD exchange rate may have much further to fall.

Risk Appetite Sends GBP/NZD Tumbling despite another Diary Price Fall

Even another decline in the price of New Zealand’s top export as a result of the latest Global Dairy Trade auction failed to prevent the GBP/NZD exchange rate from registering -0.8% losses.

Risk appetite was too strong, with China’s retaliation against Donald Trump’s steel and aluminium tariffs remaining in line with what was announced last week, which was itself a considerably softer response than market had feared. With the prospect of a global trade war diminishing, for now at least, markets were in the mood to buy into more risky assets.

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