Pound fluctuates amid mixed private sector data
The pound began last week’s session on a muted note, as markets in the UK were closed in observance of Easter.
The session then began in earnest on Tuesday, with Sterling rising on the back of the final manufacturing PMI for March. The index was revised higher to 50.3, the first time the sector had expanded since July 2022.
However, the pound then began to soften in midweek trade as data releases began to taper off.
GBP exchange rates then came under additional pressure on Thursday, following the release of the UK’s final services PMI. In March, the reading was revised lower to 53.1, the sector’s weakest reading since November.
The pound then ended the week’s session on a muted tone. Due to a light data calendar, Sterling was left rudderless, and even weakened against stronger peers.
On Friday, the latest UK GDP data is due to print. Economists are anticipating growth of 0.1% on a monthly basis. While this would indicate a second month of growth in the wake of a technical recession at the end of last year, signs of slowing activity may weaken the pound.
US dollar climbs amid hotter-than-expected non farm payrolls report
The US dollar opened last week’s trade on the front foot as USD investors welcomed a surprisingly strong ISM manufacturing PMI.
However, the ‘greenback’ quickly shed these gains as it faced a bout of profit taking.
Furthermore, the latest slate of US job openings failed to support USD despite beating forecasts, due to a downward revision to the previous reading.
The latest ISM services PMI missed expectations on Wednesday, showing a slowdown in growth during March. As markets expected an improvement to the reading, signs of softening activity weighed on the US dollar.
Dovish comments from Federal Reserve Chair Jerome Powell and rising initial jobless claims prompted further weakness in the ‘greenback’.
However, stronger-than-expected non farm payrolls data saw the US dollar skyrocket on Friday. The American economy added 303,000 jobs in March, significantly above the forecast increase of 200,000. This acceleration in job growth supported USD by pushing back existing Fed interest rate cut bets.
On Wednesday, the US dollar is likely to see volatile trade in the wake of the latest inflation data and Federal Open Market Committee (FOMC) meeting minutes. With the headline inflation rate expected to rise, any dovish signals from the Fed could offset potential gains.
Euro sluggish as ECB eyes June rate cut
After market closures on Monday, the euro began the session by rising against its weaker peers. As the US dollar declined, EUR gathered support due to its negative correlation.
However, cooling German inflation trimmed the euro’s gains. The release prompted bets on an interest rate cut this month from the European Central Bank (ECB).
Although the Eurozone’s inflation data for March cooled unexpectedly, the common currency managed to firm against its peers.
Thursday saw the euro trade in a mixed capacity. While an upward revision to the bloc’s final services PMI for March provided initial support, this was unwound by the latest ECB meeting minutes. The minutes bolstered the likelihood of a June rate cut, softening EUR exchange rates.
The end of the week saw EUR limited in its movements, amid weaker-than-expected economic data. German factory orders recovered below expectations in February, while retail sales in the bloc contracted more-than-forecast.
The European Central Bank is set to deliver its latest interest rate decision on Thursday. While the ECB is expected to leave rates unchanged, this could be the meeting where it signals a shift towards its first rate cut. In this instance, the common currency may nosedive.