Raphael Sonabend, FX Analyst
The final of the three UK sectors released their data yesterday in the form of services PMI. A rise was predicted from 57.2 to 57.6 but instead a fall to 56.7 was seen. The three sectors combined saw a slight acceleration in economic growth, driven by the construction and manufacturing expansion increases. New jobs also rose to the second-fastest rate since records began. USD strength continued yesterday despite ADP non-farm employment change falling below predictions and the Loonie gained significantly as the Bank of Canada held the overnight rate. Today will bring the UK official bank rate at 12:00, Eurozone ECB press conference and US unemployment claims at 13:30 and the Canadian Ivey PMI at 15:00. The main focus of the day will be on the ECB press conference as the bank is due to give details on the Eurozone’s upcoming quantitative easing scheme. Potential for strong euro movements if particularly hawkish.
GBP/EUR: Currently trading at 1.3806
- A climb of just under a cent was seen yesterday morning in anticipation of a strong figure from UK services PMI, unfortunately this was not registered and the figure actually decreased to 56.7. Whilst a decline was seen, employment rose at the second-fastest rate since the survey began and all three PMI surveys combined signalled an acceleration in economic growth.
- This morning’s BoE bank rate and asset purchase facility announcements are likely to be passed over quickly as our main focus for the day will be on the ECB press conference this afternoon. As there was no conference in February this will be the first since the announcement of quantitative easing and the ECB will provide the details for their scheme. If traders are satisfied with the levels of optimism and confidence the ECB portray, then there is the potential for strong euro movements.
GBP/USD: Currently trading at 1.5249
- Whilst the ADP non-farm employment change figures had been forecast to decline, they fell more than predicted by 7K; 212K is still a solid result and helped further greenback gains. The real focus for employment data will be on tomorrow’s non-farm payrolls. Later in the afternoon, US ISM non-manufacturing PMI saw a slight increase to 56.9 from 56.7 and above the forecast 56.5.
- Despite a poor result from UK Halifax HPI this morning, the pound has been recovering lost ground against the dollar, possibly in anticipation of midday’s bank rate announcement. The announcement itself will be the standard no change and no comment. US data focus will be on the unemployment claims data this afternoon. There is the possibility for dollar weakness if the ECB press conference this afternoon is particularly hawkish.
EUR/USD: Currently trading at 1.1043
- Yesterday saw a strong day for the greenback against the euro as the pair broke below the 1.11 mark and reached its lowest level since 2003. Speculation towards strong non-farms figures allowed the dollar to continue its advance over the euro.
- Today’s most important event comes in the form of the ECB Press Conference where details of the QE programme are due to be announced. We therefore expect a day of volatile trading on the back of this meeting.
GBP/AUD: Currently trading at 1.9498
- Following UK PMI Services data yesterday morning registering an unexpected decline, we saw the rate continue to move in favour of the Aussie. In the overnight session, this position was solidified as Australian retail sales registered an increase in line with forecasts and the trade deficit widened to -0.98B from -0.50B.
- With no influential data scheduled for release from either side of the pairing today, investors will be keeping an eye on the US unemployment claims announcement this afternoon. With a decline predicted, support for the Aussie could be seen.
GBP/NZD: Currently trading at 2.0258
- The Kiwi continued to post gains in yesterday’s session, aided by poor services PMI data out of the UK. A lack of data out of New Zealand proved beneficial for the NZD as it gained three cent throughout the day. Sterling has since recovered two cent this morning but it is too early to say if this is the start of a reversal or just a dead cat bounce.
- Little data out of either country could prove beneficial for the pound as it continues to gain on the Kiwi. The official bank rate from the UK is unlikely to bring much movement and our focus will instead be on US data this afternoon. A strong figure from US unemployment could provide Kiwi support.
GBP/CAD: Currently trading at 1.8932
- The Loonie gained three cent on the pound yesterday as the Bank of Canada held their overnight rate at 0.75%. Whilst this decision was widely expected, clearly the more dovish traders chose to hold off on trades until the final result was announced.
- The Canadian Ivey PMI will take the spotlight for today and with a strong rise from 45.4 to 49.4 predicted, Loonie strength is likely to continue. With a result forecast so close to the neutral mark, even a slight increase above predictions could take the figure above 50.0 and signify an expansion.
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