Pound (GBP) Flat following Mixed PMIs
The Pound (GBP) traded mostly sideways yesterday, after mixed results from this month’s flash PMIs.
The manufacturing PMI came in at 64.2 – 0.2 above expectations – while the services PMI was 1.3 lower than the forecast figures. While the PMIs still point to strong growth in the UK economy, the Pound still struggled as the composite figure fell short of expectations.
GBP may also have been pressured by UK coronavirus concerns, as the number of Covid patients on ventilators increased by 41% last week, causing alarm among medical professionals.
Looking ahead, the Bank of England’s (BoE) interest rate decision is in the spotlight today. Economists expect the bank to leave interest rates unchanged, but it is still possible that the BoE will take a more hawkish tone following the decision. If so, this could prompt an upside in Sterling.
Euro (EUR) Muted amid Coronavirus Concerns
The Euro (EUR) had a mixed day of trading yesterday, as better-than expected PMIs were offset by fresh coronavirus fears.
The Eurozone’s flash PMIs for this month beat market forecasts, with the expansion in service-sector activity rising at its fastest pace since July 2007, providing support for the Euro early on.
However, concerns over the spread of the Delta coronavirus variant in Europe have sparked fears that progress towards completely reopening the European economy could be undermined, which may have dragged on the single currency.
This morning’s Ifo business climate figures from Germany could support the Euro as the day goes on, as business morale hit 101.8, its highest figure since November 2018 and above market predictions of 100.6.
US Dollar (USD) Rangebound on Ambivalent Data
The US Dollar (USD) was also relatively rangebound yesterday, as dovish comments from Federal Reserve Chair Jerome Powell on Tuesday evening weighed on USD through the European trading session.
The ‘Greenback’ regained some losses following its Markit PMIs but struggled to find any clear directional bias overall. While manufacturing beat expectations by 1.1, the services PMI came in 5.2 points lower than the forecast figure, however the results still point to a strong economic recovery in the US.
Turning to today, the US durable goods orders for last month could bolster the US Dollar, as the figures are expected to show a 2.8% increase in new orders.
Canadian Dollar (CAD) Undermined by Sales Figures
The Canadian Dollar (CAD) struggled to find support yesterday, as stability in WTI crude was offset by Canada’s retail sales figures for April, which showed a worse-than-expected contraction in domestic sales of 5.7%.
With no notable data releases due from Canada today, crude prices are likely to drive most movement in the commodity-linked ‘Loonie’.
Australian Dollar (AUD) Subdued despite Risk-On Sentiment
The Australian Dollar (AUD) traded in a narrow range overnight, with the currency unable to capitalise on the prevailing risk-on mood amid reports of a ‘dangerous’ coronavirus outbreak in Sydney.
New Zealand Dollar (NZD) Gains on Upbeat Market Mood
The New Zealand Dollar (NZD) climbed in overnight trade, buoyed by a bullish market sentiment.