Morning Report 02.04.2015 – Market unimpressed with UK PMI
Nicholas Ebisch, FX Analyst
UK Manufacturing data came in yesterday below market expectations, which saw the pound fall against major currency pairings. Disappointing employment and manufacturing data from the US triggered dollar selling in the afternoon. Today will see the UK's Construction PMI in the morning followed by US trade balance and unemployment claims data in the afternoon. Traders will continue to position ahead of the all-important US non-farms employment data which coincides with a thin market ahead of its release on Good Friday and leads us nicely into a long Easter weekend.
GBP/EUR: Currently trading at 1.3718 (up arrow)
Weak manufacturing data from the UK coupled with forecast beating manufacturing data out of the Eurozone yesterday saw the single currency gain around 0.7% in the morning to 1.3710. Sterling then managed to regain some ground in afternoon trading, closing at 1.3765.
With little data of note coming out of the Eurozone today, the main focus will be on UK Construction PMI at 09:30. With the upward revision of GDP for the final three months of 2014 for the UK, this figure may be released higher than forecast which will allow Sterling to progress against the Euro over the course of today.
GBP/USD: Currently trading at 1.4847 (side arrow)
The first trading day of April was down and then right back up. On target UK data in the morning resulted in cable trading down to as low as 1.475 during mid-morning, only to recover to 1.4830 in the afternoon as a result of poor US data. This pairing is steady at the moment, and is not being driven consistently one way or another.
Today's data may slightly move the exchange rate, but the important data comes tomorrow during the UK bank holiday, as traders eagerly await US non-farm employment change and the US unemployment rate.
EUR/USD: Currently trading at 1.0828 (side arrow)
Yesterday saw the dollar’s advance against the euro once again halted, as both the employment change figure and manufacturing PMI data out of the US came out worse than expected, allowing the euro to remain above the 1.0750 mark for most of the afternoon. This morning’s early trading session has seen further support for the euro, with the single currency breaking above 1.08.
There are no important announcements out of the Euro-zone today, so the pairing is expected to be influenced by data releases later on at lunchtime from the US. At 1.30pm sees the US trade balance forecast to improve and unemployment claims set to increase, shortly followed by a speech by Fed chair Yellen, so we expect to see a volatile afternoon for the pairing.
GBP/AUD: Currently trading at 1.9554 (side arrow)
The sterling accent continued yesterday afternoon as the US registered a series of weaker than expected results with Non- farm employment falling along with Manufacturing PMI. This trend continued in the overnight session as the AUD Trade balance deficit widened adding to the impact of falling iron ore prices and the fear of a rate cut.
We could see added volatility today with UK Construction PMI data this morning, forecast to drop off slightly, to be followed by USD trade balance and unemployment claims this afternoon.
GBP/NZD: Currently trading at 1.9837 (side arrow)
There were few surprises in yesterday’s data releases concerning this pair, however UK Manufacturing PMI data slightly undershot expectations so the kiwi dollar gained the initiative and saw this pairing get rejected around a cent higher than we are at the moment.
Given the time difference New Zealand will now be closed for business and looking forward to a bank holiday, so there will be no data to feed off today from our antipodean friends, however UK Construction PMI data will be eyed closely this morning (released 09:30) and will provide the direction today for this pairing.
GBP/CAD: Currently trading at 1.8726 (down arrow)
Sterling took a surprised hit yesterday when UK manufacturing fell just outside expectation expanding to 54.4, from 54.0 previous. Although this sector grew at the fastest rate in eight months, the market was still disappointed.
This morning brings us UK Construction PMI data, which forecasters are predicting will show a decline from last month’s release. The afternoon session will bring Canadian Trade balance, which has been predicted to improve. With this in mind we expect downside risk against the pound.
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