More upbeat economic data offers struggling Pound some respite
Today’s macro highlights:
- GBP - Markit/CIPS UK Services PMI (June)
- EUR - Markit Eurozone Services PMI (June)
More upbeat economic data offers struggling Pound some respite.
Political uncertainty is without a doubt casting a dark shadow over Sterling’s fortunes right now, but again yesterday we saw another UK PMI print - this time for construction - come in above expectations. That’s giving the Pound some much needed support - GBP/USD remains admittedly close to lows for the year, but the uptick in sentiment is certainly adding weight to the idea we might see that Bank of England rate hike next month.
In light of the upbeat PMI readings we’ve already see this week, today’s UK Services PMI due at 9.30am will again be closely followed. As we’ve seen of late, the market has been very keen to jump on any perceived bad economic news - and perhaps a little less enthusiastic about cheering the positives - so the risk ahead of this print does appear to be very much weighted on the downside. That said, if we do see another better than expected print here, gains could well be extended. It’s probably too much to suggest there’s any “World Cup” effect in play following England’s progress last night, but with nothing due out of the US today owing to the 4th July holiday, this again may give scope for gains to be a little more pronounced than may usually be the case.
Eurozone Services PMI readings are also expected this morning, and these will attract attention. Yesterday’s shortfall in retail sales from the currency bloc again points to the idea that the economy may be running out of steam even before the ECB wind down their bond buying programme. EUR/USD did manage to creep a little higher yesterday, but anything that points towards the end of quantitative easing being delayed further will understandably be taken as a negative for the common currency.
There’s no data out of the US today owing to the Independence Day holiday. However it’s worth bearing in mind that foreign exchange is a truly global market and with algorithm based trading we’re also a long way past the point where a scheduled absence of traders in one particular market could on its own lead to exaggerated volatility. It’s more the lack of news flow that could keep the potential for dollar gains in check.
The market holiday across the Atlantic will also have the effect of delaying the release of some regular data until later in the week. Most notably, the ADP payroll survey which would normally be released today will instead be held until 1.15pm BST tomorrow.
The pair has managed to claw its way back to levels not seen in a week and more upbeat economic data today could provide further gains in the short term. However Friday’s key government meeting over Brexit strategy could raise fresh questions over leadership and in turn prove damaging for the Pound.
The market is seeing yesterday’s modest gains as consolidation ahead of what is expected to be a quiet session today. The pair is vulnerable to downside pressure if speculation mounts over the extending of QE.
The pair posted its first day of gains in a week yesterday, reacting to the divergence in economic data. However political risk is on the agenda for both the Pound and Euro - and the potentially more damaging scenarios still leave the Pound on the back foot.