Storms Wreak Havoc on UK Services – Pound (GBP) Exchange Rates Struggle
Sterling was trading rather poorly against the majors on Thursday morning, limited by a disappointing performance in the UK’s services sector.
IHS Markit’s services sector purchasing managers’ index (PMI) surprised markets by printing at 51.7 for the March period, down from the previous month’s score of 54.5 and the forecast of 54.2.
This result was largely due to the severity of recent snowstorms – with Britain’s construction and manufacturing sectors also both taking a hit.
Markets were quite concerned by this news, as the services sector makes up 79% of the UK’s GDP.
As a result, the UK’s economic growth during the first quarter could have been adversely affected.
GBP/EUR Exchange Rates Down despite Mixed Eurozone Data
Data from the bloc was quite mixed today, with the Eurozone’s retail sales figure coming in at 1.8%; up from the previous period’s 1.5% but below the forecast of a 2.3% rise.
The composite PMI reading also came in lower at 55.2, (though this is still rather robust) and Germany’s new factory orders saw a massive drop in growth from 6.3% to 3.5%.
This failed to push investors away from the single currency however, which still remained the more attractive option compared to Sterling this morning.
Global Trade War Fears take Temporary Reprieve – GBP/USD Exchange Rate Tumbles
The US Dollar made a hasty recovery on Thursday morning on sentiment that fears of a trade war might not be entirely justified.
Recent comments from top US Economic Advisor Larry Kudlow indicated that US President Donald Trump’s proposed tariffs on China might not go into effect if China lowers its barriers to trade.
‘It’s part of the process,’ he stated, downplaying recent fears.
‘I mean, I would take the President seriously on this tariff issue. You know, there are carrots and sticks in life, but he is ultimately a free trader. He’s said that to me, he’s said it publicly. So he wants to solve this with the least amount of pain.’
This outlook provided some relief for investors and pushed demand back to the ‘Greenback’, putting the GBP/USD exchange rate under pressure.
Looking ahead, markets will be assessing the US trade balance and initial jobless claims readings, due around midday today.
GBP/CAD Exchange Rate Trades Sideways on Quiet Canadian Data Day
The Pound Canadian Dollar (GBP/CAD) exchange rate traded sideways on Thursday morning, limited by poor domestic data releases in the UK but also bearish ahead of tomorrow’s Canadian employment readings.
Markets currently expect unemployment in Canada to remain high at 5.8% in March, but with a small increase in hourly earnings for permanent employees during the same period.
Ultimately, if unemployment does not begin to decrease then the Bank of Canada (BoC) could continue to be pushed away from hawkish policy measures.
GBP/AUD Exchange Rate Rallies as US Dollar Recovers
The recent dovish Reserve Bank of Australia (RBA) decision has finally caught up with the ‘Aussie’ Dollar, with the current strength of the US Dollar effectively ending its rally.
On the data front, today’s news from Australia was also rather poor, with the Australian trade surplus shrinking in February from A$952m to A$825m.
This was, however better than the forecast of a fall to A$725m.
Looking ahead, trade negotiations between the US and China will likely be the biggest driver for the Australian Dollar, though tomorrow’s US employment and wage readings could also knock GBP/AUD up or down.
Global Dairy Trade Price Falls – GBP/NZD Exchange Rate Capitalises
Sterling was trading higher against the New Zealand Dollar (GBP/NZD) on Thursday, capitalising on news that global dairy trade prices have fallen for the fourth consecutive time at the fortnightly auction.
The global dairy trade price index fell by -0.6%; down from the previous period’s fall of -1.2% but a fall nonetheless.
Whilst dairy production in New Zealand is improving, the recovery from recent seasonal pressures is still very gradual – news that has kept prices in decline.