Morning Report 07.04.2015 - A Weak Dollar lets others benefit

Nicholas Ebisch, FX Analyst


With the dollar reeling from poor US non-farms employment change data on Friday, the euro has strengthened and the pound has steadied over the long Easter weekend. Currency markets have seen a fundamental shift from the poor US data, which could be an indicator that the Fed will wait longer to raise interest rates in the states. Construction PMI data is out for the UK this morning, and with exactly one month until Election Day, the candidates are hot on the campaign trail and we can expect some volatility from sterling.

GBP/EUR: Currently trading at 1.3706

Thursday saw the Euro gain around 0.7% on Sterling. This was on the back of below forecast construction PMI data out of the UK.

Attention today will be on services PMI data coming out of the UK and the Eurozone. With a recent pickup in economic activity in the Eurozone, forecast beating data could be seen again that will allow the single currency to advance further against Sterling.

GBP/USD: Currently trading at 1.4874

Cable had gone up towards the 1.50 level, but many expected this to be short-lived, as the momentum is in favour of the strengthening dollar at the moment. Currently trading around the 1.49 level, this exchange rate will likely hold these approximate levels until there is more sound evidence supporting the expected result of the UK General Election, or until there is confirmed news in regard to the US Federal Reserve’s forward guidance policy.

EUR/USD: Currently trading at 1.0860

The dollar was able to recoup some of Friday’s losses yesterday as US service sector PMI rose to 59.2 in the month of March signalling the fastest pace of expansion in the service sector since August 2014. This moved the rate over a cent in favour of the Dollar.

With little data scheduled for release today, investors will be focussing attention on Eurozone retail sales and FOMC minutes tomorrow to be followed by USD initial jobless claims on Thursday.

GBP/AUD: Currently trading at 1.9475

The Reserve bank of Australia’s largely unexpected decision to hold interest rates this morning saw the rate fall 3 cent in favour of the Aussie from around 1.96 to 1.93 before the trend was met with natural correction. This provided a much needed let – off for the struggling commodity currency.

With UK PMI services data this morning forecast to improve on last month’s reading, we could see further correction throughout the day.

GBP/NZD: Currently trading at 1.9768

Thursday saw the Kiwi gain around 0.35% against Sterling. This was caused by a rise in commodity prices, leading to greater demand for NZD as the New Zealand economy is heavily reliant on Commodity exports.

Looking ahead today, with no real data of note being released from New Zealand, moves in this pairing will be determined by services PMI data coming out of the UK.

GBP/CAD: Currently trading at 1.8574

On Thursday we discovered that Construction PMI fell short of expectation, falling to 57.8 in March, from 60.1 in February. This coupled with a surprisingly good Trade Balance from Canada gave the loonie a surge in the early afternoon.

Today brings us UK Services PMI data which is being forecasted to increase from the 56.7 reading in February. With this being the only key driver today, we could see gains made by the pound if predictions are correct.


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