UK Construction PMI Beats Forecasts, but Pound Sterling (GBP) Exchange Rates Still Fall
The Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) exchange rates slumped at the start of the week, with Sterling softening across the board.
May’s UK construction PMI held steady on the month as the headline figure remained at 52.5, defying forecasts of a downturn.
Even so, this was not enough to shore up the Pound during Monday’s European session thanks to the less optimistic underlying nature of the report. Business optimism fell to a seven-month low and dented confidence in the economic outlook, leaving GBP exchange rates on a generally weaker footing.
But if today’s services PMI shows an improvement on the month this could offer Sterling a solid rallying point.
Euro (EUR) Exchange Rates Supported before Retail Sales Data
Although April’s Eurozone producer price index figures fell short of forecast this failed to prevent Euro (EUR) exchange rates making gains yesterday.
While producer prices stagnated on the month investors were quick to shrug off the data, still encouraged by easing political tensions within the Eurozone. With the new Italian government in place the threat of a fresh Eurozone crisis appears to have dissipated, even though there is a risk that the populist coalition will clash with the EU over budget restrictions.
With forecasts pointing towards solid growth in Eurozone retail sales in April the mood towards the Euro could remain bullish today.
Appeal of US Dollar (USD) Exchange Rates Dented by Disappointing Durables Data
An unexpectedly sharp contraction in US factory orders left USD exchange rates on a weaker footing yesterday. With April’s durable goods orders figure also confirmed to have dropped significantly on the month confidence in the US economy faltered.
This gave investors fresh incentive to sell out of the US Dollar, particularly as markets continued to favour higher-yielding assets even in the face of the latest uncertainties over the global trade outlook.
A strong showing from May’s ISM non-manufacturing composite index could see the US Dollar quickly recovering its lost ground, however.
Canadian Dollar (CAD) Exchange Rates Undermined by Falling Oil Prices
Even with market risk appetite strengthening, Canadian Dollar (CAD) exchange rates started to slip back yesterday, dragged down by weaker oil prices.
While signs point towards the OPEC-led production limiting agreement remaining in place for some time to come the market remains pressured by rising US output. In the wake of the US decision to impose steel and aluminium tariffs on Canada there was little to prevent CAD exchange rates trending lower.
If worries over US protectionism continue to mount this is likely to keep the Canadian Dollar under pressure this week.
Australian Dollar (AUD) Exchange Rates Boosted by Domestic Data
Confidence in Australian Dollar (AUD) exchange rates picked up at the start of the week as the latest raft of domestic data bettered expectations.
Markets were encouraged by a solid uptick in April’s retail sales data alongside strengthening business figures and a stronger TD Securities inflation estimate. All in all, this painted a generally positive picture of the health of the Australian economy, giving investors incentive to pile into the ‘Aussie’ yesterday.
New Zealand Dollar (NZD) Exchange Rates Push Higher before Dairy Auction
With investors largely shrugging off concerns over the prospect of a US-instigated trade war the New Zealand Dollar was able to push higher against many of the majors. As markets remain optimistic that the US will pull back from the brink, using its protectionist measures merely as a negotiation tactic, NZD exchange rates benefitted.
An uptick in prices at the latest Global Dairy Trade auction could give the ‘Kiwi’ an additional boost today.