Surprise Contraction in UK Construction PMI Weakens Pound Sterling Exchange Rates
Pound Sterling was left on mixed form yesterday, in part thanks to the latest disappointing construction PMI from IHS Markit. The index for March was expected to weaken from 51.4 to 51, but instead dropped to 47; below the neutral 50 mark and therefore signifying that the sector actually contracted last month.
This was in large part due to the recent severe snowstorms, but it’s nonetheless a dent in the productivity of the UK economy at a time when it could really do without one.
Today’s services and composite PMIs could cause significant volatility for the Pound, especially if they prove as underwhelming as the manufacturing and construction indices already released.
Strong Eurozone Jobless and Inflation Data Pushes GBP/EUR Exchange Rate below Opening Levels
The GBP/EUR exchange rate was stuck just below opening levels yesterday, with the Euro supported by the latest unemployment and consumer price index data for the currency bloc. The jobless rate fell from 8.6% to 8.5% as expected - the lowest seen since the financial crisis.
Additionally while core Eurozone inflation defied expectations and held steady at 1% instead of ticking marginally higher, overall price growth rose from 1.1% to 1.4%. This could put some additional pressure on the European Central Bank (ECB) to begin tightening in its ultra-loose monetary policy.
Eurozone retail sales figures are expected to show that growth remains unchanged at 2.3% - a respectable but uninspiring outcome that may do little for the Euro other than offer some mild support.
GBP/USD Exchange Rate Edges Marginally Higher on Mixed US Data
An afternoon of mixed US data allowed the GBP/USD exchange rate to edge higher yesterday. On the one hand the ADP employment change report showed an above-forecast 241,000 people entered the workforce in March, beating forecasts by over 30,000 and suggesting the Friday’s non-farm payrolls report could also offer an upbeat assessment of the labour market.
However, the ISM non-manufacturing composite index fell further than expected to 58.8 and growth in factory orders during February recovered to 1.2% rather than the 1.7% expected.
Given the current focus on Donald Trump’s protectionist agenda, markets may be most interested to see the size of the US trade deficit figures for February today.
Resurging Trade War Fears Give GBP/CAD Exchange Rate a Boost
As quickly as they had waned, trade war fears were back again to clip the wings of market risk-appetite, pushing the commodity-correlated Canadian Dollar lower yesterday. The GBP/CAD exchange rate was able to scrape small gains as the ‘Loonie’ was dragged lower by tumbling oil prices, with Brent crude dropping -1.6% and WTI falling -1.9%.
Strong Australian Retail Sales Figures Undermine GBP/AUD Exchange Rate despite Risk-off Atmosphere
The Australian Dollar was more resilient to weakening market risk appetite yesterday, which meant the GBP/AUD exchange rate remained on the downtrend.
Although the day’s ANZ Roy Morgan weekly consumer confidence index for the beginning of April and building approvals for February all weakened, it was revealed that retail sales had grown at twice the forecast pace, expanding 0.6% in a sign that perhaps consumer activity is beginning to pick up. This would be good sign for inflation and therefore for the monetary policy outlook.
Markets Buy Back New Zealand Dollar after Selling On Trade War Fears; GBP/NZD Exchange Rate Slumps
Markets yesterday may have been in a more cautious mood than they were at the beginning of the week, but traders were beginning to buy back into the New Zealand Dollar after several days of selling it. This pushed the GBP/NZD exchange rate lower.