Pound Sterling (GBP) Exchange Rates Advance as Manufacturing Output Improves
Confidence in Pound Sterling (GBP) exchange rates picked up on Friday thanks to a better-than-expected UK manufacturing PMI, with GBP/AUD and GBP/NZD rising.
The index showed a surprise uptick from 53.9 to 54.4, encouraging investors to pile back into Sterling. The improvement stoked bets that the domestic economy recovered momentum in the second quarter, with markets still optimistic that the Bank of England (BoE) will vote to raise interest rates in August.
With forecasts pointing towards a decline in the UK construction PMI, however, GBP exchange rates look vulnerable today.
Euro (EUR) Exchange Rates Fluctuate, Italian Political Fears Ease
Euro (EUR) exchange rates held firm on Friday despite Spanish Prime Minister Mariano Rajoy losing a vote of no confidence.
Markets are hopeful that the departure of Rajoy will not prompt any major shift in policy, with political turmoil limited by the speedy takeover of a leftist prime minister elect.
A resolution to the Italian deadlock also helped to support the Euro, even though doubts remain over the populist coalition. A stronger US Dollar, however, knocked EUR exchange rates back during Friday’s European session.
An uptick in the Eurozone producer price index could give the Euro cause to climb today providing the data points towards rising inflationary pressure within the currency union.
US Dollar (USD) Exchange Rates Firm on Upbeat Employment Data
US Dollar (USD) exchange rates were bolstered before the weekend as the latest US employment figures impressed.
Markets were pleasantly surprised to find that the US unemployment rate had fallen further in May, dipping from 3.9% to 3.8%.
This stronger showing indicates that the US labour market is continuing to tighten, something which is likely to be welcomed by Federal Reserve policymakers. A better-than-expected average hourly earnings figure offered an additional boost to USD exchange rates, even in the face of uncertainty over the impact of a US-EU trade war.
A contraction in US factory orders may not be enough to knock the US Dollar back later today.
Canadian Dollar (CAD) Exchange Rates Struggle on US Steel Tariffs
The US decision to impose steep steel and aluminium tariffs on Canada left Canadian Dollar (CAD) exchange rates on a downtrend on Friday.
Canada’s weaker growth data also added to concerns that the economy is likely to come under increasing pressure in the months ahead, preventing the Bank of Canada (BOC) from tightening monetary policy further.
If oil prices remain under pressure today the Canadian Dollar is likely to follow suit.
Trade War Worries Weigh on Australian Dollar (AUD) Exchange Rates
Renewed fears over the prospect of a global trade war weighed heavily on Australian Dollar (AUD) exchange rates ahead of the weekend.
While Australia is not directly impacted by the US decision to impose steel and aluminium tariffs on the Eurozone, Canada and Mexico, AUD exchange rates still came under pressure. The risk-sensitive ‘Aussie’ failed to find any support, meanwhile, as May’s manufacturing PMI showed a slight loss of momentum on the month.
Disappointing NZ Data Sends New Zealand Dollar (NZD) Exchange Rates Lower
New Zealand Dollar (NZD) exchange rates slumped ahead of the weekend in response to a sharp contraction in the first quarter New Zealand terms of trade index.
The decline in the terms of trade encouraged investors to pile out of the New Zealand Dollar once again, especially as the general sense of market risk appetite deteriorated. Confidence in the domestic outlook remains distinctly limited at this juncture, to the detriment of the ‘Kiwi’.
In the absence of any positive domestic data NZD exchange rates look set to remain on a weaker footing.