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Can Sterling regain that Friday feeling?

Can Sterling regain that Friday feeling?

Sterling remained under pressure yesterday as the lack of economic data left prices to market sentiment. The Pound has failed to recover losses sustained throughout the week amid ‘Brexit’ fears. The implied volatility gauge for GBPUSD reached 16% yesterday, showing that uncertainty surrounding the future of Cable is the highest it has been in six years.

Today sees the release of UK manufacturing production for March, along with the goods trade balance and industrial production. Manufacturing production is predicted to print at -0.2%, showing a reduction in output from February.

The odds of a poor manufacturing production reading are high considering that the Manufacturing PMI for February hit a 34 month low due to a slowdown in domestic and overseas new orders. The market has already started to price this in this morning as GBPUSD opens lower at 1.4045.

US initial jobless claims yesterday showed signs of improving confidence in the overall labour market, falling to 267k against the expectation of 270k, and down from 276k the previous week.

The Dollar bulls came out on top yesterday, spurred on by a less cautious tone from Federal Reserve Chair Janet Yellen who reminded investors that U.S. interest rate hikes are still on the cards this year. Yellen, speaking on a panel with three previous heads, said that the labour market was “close” to full strength and that inflation was currently held back by temporary factors.

The Greenback responded positively, firming up and showing gains across all the main currency pairs. EURUSD broke through the 1.1450 level in the morning session, but the Dollar fought back throughout the rest of the trading day gaining 0.66% from the daily highs to open this morning at 1.1378. There is no data of note out of the US for today.

The European Central Bank (ECB) monthly monetary meeting for March took place yesterday. Dovish comments made by President Draghi initially weakened the Euro against the Pound. GBPEUR moved up by nearly 1% to a daily high of 1.2422 as soon as comments were made about the expansion of monetary policy and responses to concerns over a weaker global environment. However, Euro losses were later receded, finishing the day around mid 1.23 levels.

Data to watch: 9.30am UK Manufacturing Production (MoM)(YoY). UK Industrial Production (MoM)(YoY). UK Trade Balance (Feb).

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