Pound (GBP) mixed as investors assess UK PMI
The pound (GBP) traded unevenly yesterday as markets responded cautiously to the UK’s final services PMI for May.
While the index was revised up from 47.9 to 49.3, it still signalled the first contraction in service-sector activity since April 2025.
Looking ahead, Bank of England (BoE) Governor Andrew Bailey is due to speak this afternoon. Should Bailey repeat that he is prepared to tolerate above-target inflation in the short term in order to shield the UK economy, Sterling could come under pressure.
Euro (EUR) muted after PMI figures
The euro (EUR) also lacked a clear direction on Wednesday, after the Eurozone’s final PMI was revised higher but continued to indicate a decline in activity.
Meanwhile, stronger-than-expected Eurozone producer price inflation failed to provide much support. The common currency also faced headwinds from its negative correlation with a stronger US dollar (USD).
A speech from European Central Bank (ECB) President Christine Lagarde may lend EUR support today, if she signals that interest rate hikes could be needed. However, the euro may weaken later in the session if the bloc’s latest retail sales data shows a fourth straight monthly contraction in April.
US dollar (USD) strengthens amid souring mood and upbeat data
The US dollar climbed yesterday, with the safe-haven ‘greenback’ initially supported by a downbeat market mood.
USD then extended its gains following stronger US data. The latest employment figures pointed to a solid rise in hiring last month, while the ISM services PMI showed activity accelerating by more than forecast.
Aside from the latest initial jobless claims figure, risk appetite may be the main driver of USD exchange rates today. If sentiment remains cautious, the ‘greenback’ could strengthen further.
Canadian dollar (CAD) rangebound despite firmer oil and upbeat data
The Canadian dollar (CAD) traded mostly flat yesterday, with the oil-linked currency unable to capitalise on rising crude prices and a stronger-than-forecast domestic services PMI.
With Canadian economic data in short supply today, oil price movements could shape CAD exchange rates. If crude prices continue to rise, the ‘loonie’ may edge higher.
Australian dollar (AUD) weakens in risk-off trade
The Australian dollar (AUD) initially softened overnight as a cautious market mood weighed on the risk-sensitive currency. However, AUD managed to recover some ground this morning after Reserve Bank of Australia (RBA) Governor Michele Bullock delivered a relatively balanced speech.
New Zealand dollar (NZD) subdued amid market nerves
The New Zealand dollar (NZD) slipped to one-week lows overnight as the gloomy market mood weighed on the currency, before recovering from its weakest levels and settling into broadly sideways trade.
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