UK Domestic Data Proves Positive, Pound (GBP) Exchange Rates Bolstered
Pound Sterling (GBP) inched ahead against the majors on Thursday, propelled by a run of positive UK ecostats.
The most pertinent out of these releases was perhaps the UK Markit services purchasing managers index (PMI), which expanded to 54.2 in December, up from the forecast of 54 and the previous period’s print of 53.8.
This marked the second-highest reading since April, with rising consumer spending largely boosting business activity.
Conversely, Brexit-related uncertainty continued to hold back clients’ openness to spending, though business optimism, surprisingly, climbed to a 7-month high, bolstered by new product launches and hopes for stronger demand amid better global economic conditions.
So what does this mean for Sterling?
The service sector makes up almost 80% of the UK’s economy, so any growth here – especially above forecast growth – reflects positively on the UK, and indeed the Pound.
GBP EUR Exchange Rate Steady as Eurozone Companies Post Strongest Growth Since 2011
The Pound Euro (GBP EUR) exchange rate remained predominantly steady on Thursday morning, limited by a run of positive domestic data releases from the bloc.
The Eurozone’s composite PMI – a measure of activity across the region – climbed to 58.1 in December, beating November’s 57.5 reading.
Meanwhile, the service sector inched up from 56.2 to 56.6, with new orders strengthening and manufacturers claiming the sharpest increase in new business since 2000.
This rounded off the Eurozone’s best year in over a decade, confounding fears that political uncertainty might curb growth within the bloc.
GBP USD Exchange Rate Climbs Amid Mixed FOMC Meeting Minutes
The Pound US Dollar (GBP USD) exchange rate rallied on Thursday, lifted by the UK’s upbeat services PMI as well as the mention of ongoing inflation concerns in the December FOMC meeting minutes.
The Fed voted to increase its benchmark interest rate to 1.5% at the meeting, and generally had an upbeat outlook on the future of the US economy.
The minutes stated:
‘Real economic activity appeared to be growing at a solid pace, buttressed by gains in consumer and business spending, supportive financial conditions, and an improving global economy’.
The minutes also pointed to soft inflation levels, although the majority of officials ‘judged that much of the softness in core inflation this year reflected transitory factors and that inflation would begin to rise as the influence of these factors waned’.
Looking ahead, today will feature the release of US employment figures as well as the US composite PMI reading for December; two events that could knock the Pound US Dollar exchange rate either way.
GBP CAD Exchange Rate Stable Today Despite Crude Oil Surge
Despite the ongoing surge in crude oil prices the GBP CAD exchange rate remained mostly stable on Thursday, buoyed by the latest run of UK ecostats and the recent volatility of the US Dollar.
Markets will, however, be looking to today’s Canadian raw material prices figures as well as the industrial product price index (PPI) readings for November for further insight into the Canadian economy.
Looking further ahead, the Bank of Canada (BOC) recently published a report warning that raising the minimum wage in Canada could result in the loss of some 60,000 jobs.
This is all the more relevant in that a large number of Canada’s regions are soon set to raise the minimum income rate by the end of 2018 – an eventuality that would make it harder for employers (particularly at small-time businesses) to afford to pay salaries, thus reducing business investment and development.
Rise in Iron Ore Prices Limits Pound Australian Dollar (GBP AUD) Exchange Rate
The Pound Australian Dollar (GBP AUD) exchange rate failed to fully capitalise on the UK’s upbeat services PMI on Thursday, limited by a prolonged rise in iron ore spot markets and the relative weakness of the US Dollar (USD)
In other news, the recent prediction from HSBC Australia that a rate hike from the Reserve Bank of Australia (RBA) could be due in mid-2018 continues to limit the GBP AUD pairing. Wednesday’s AiG performance of service index figure for December also rose to 52.0 from 51.7, keeping the ‘Aussie’ Dollar on good form.
Surging Dairy Prices and Upbeat Chinese Data Leaves the GBP NZD Exchange Rate Stumbling
The GBP NZD exchange rate extended its fall on Thursday morning, limited by ‘Kiwi’ Dollar bulls deriving support from China’s upbeat Caixin December PMI release, and the recent surge in global dairy prices.
Chinese service activity experienced an upturn in December, climbing to 53.9 from 51.9 and beating the forecast of a drop to 51.8.
This is pertinent in that China is one of New Zealand’s top trading partners.