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Beach weather building boon

Beach weather building boon

GBP
UK construction PMIs printed slightly above consensus forecasts, unchanged at 52.5 for May; unusually clement weather has been accredited. The data also showed a slight drop-off in new orders and business optimism declined to a seven-month low. The Pound edged higher but the data wasn’t enough to cause any significant reassessment of the outlook ahead of today’s Services PMI release.

The benefit of firm risk conditions was offset by a decline in oil prices and Sterling lost ground in US trading. There was a slide to near 1.3300 against the Dollar after failing to break 1.3400 and the Euro advanced to the 1.1400 area. Bank of England MPC member Tenreyro stated that a gradual tightening of monetary policy will be needed over the next three years. First-quarter weakness was likely to have been erratic, although it raised the possibility of some underlying weakness. In this context, there seems little cost in waiting a short period to evaluate more information.

BRC and Barclaycard data both recorded a strong rebound in May retail sales with the BRC reporting a 2.8% annual increase in like-for-like sales, but Sterling was unable to gain any support and traded near 1.3300 as Brexit uncertainty continued.

EUR

Eurozone Sentix investor confidence declined more sharply than expected for June with a reading of 9.3 from 19.2 previously, the lowest level since October 2016. The Eurozone political environment was much calmer yesterday as the populist 5-Star/Lega government headed by Prime Minister Conte prepared for confidence debates in parliament with a Senate vote expected after close of business today.

The Euro advanced to highs just below 1.1750 as the Dollar Index also lost support, although the single currency was unable to sustain the best levels amid underlying political uncertainty. Overall, the Euro declined to just below the 1.1700 level later in the New York session as underlying bond yield spreads continued to underpin the US currency and the Euro traded just below this level early at market open.

USD

The Greenback appears to be on the up this morning, managing well to keep the currency above the 94.00 level on the US Dollar Index. Yields of the US 10-year also moved higher and are now flirting with the 2.94% zone, near recent highs.

The White House has reported that sanctions currently on North Korea from the US will remain in place, despite a confusing Tweet from President Trump over the weekend, stating that he wants to stop using the “maximum force” descriptor because the two parties are agreeing with each other. Trump also signalled his intention to push ahead with a transatlantic trade war by imposing tariffs on steel and aluminium imports from the EU, Canada, and Mexico.

The White House Press Secretary Sarah Huckabee Sanders announced a set time for the much-awaited meeting likely to take place between US President Trump and North Korean leader Kim Jong-Un on June 12th in Singapore.

Across the pond, we have the NFIB index and the IBD/TIPP gauge of Economic Optimism are due, preceding the more relevant ISM Non-manufacturing PMI.

Data to watch:

08:00 EUR Markit PMI Composite (May)
08:00 EUR Markit Services PMI (May)
08:30 GBP Markit Services PMI (May)
10:00 GBP MPC Member Cunliffe Speech
13:45 USD Markit Services PMI (May)
13:45 USD Markit PMI Composite (May)
14:00 USD ISM Non-Manufacturing PMI (May)
17:30 EUR German Buba President Weidmann speech

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