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Plenty of volatility and it’s not Brexit-related, for once

Plenty of volatility and it’s not Brexit-related, for once

The trend of poor economic data from the UK continued yesterday with construction PMI data coming in weaker than expected at 52.0. Underlying fears about the state of the UK’s economy have been further reinforced with the EU referendum looming. Construction PMI had muted impact on the currency market yesterday after Tuesday’s poor manufacturing data shocked GBPUSD from the highs of 1.47 down to 1.45.

Today, services PMI data will be released for April, with the market forecasting little change from March’s figure of 53.7. If the data prints worse than the predicted 53.6, expect Sterling to fall against both the Euro and the Dollar, potentially exceeding Cable’s weekly low of 1.4462 yesterday.

The Dollar edged higher against most of its major rivals on Wednesday, despite some mixed data out of the US. The ADP National Employment Report disappointed as it showed that the private sector added only 156k new jobs in March, below the expected 196k. Although that report was not market moving, it serves as a gauge for the all important Non-Farm payroll report to be released on Friday. The services sector grew by more than expected whilst new orders for U.S. factory goods also rose more than expected, up by 1.1% after February’s 1.9% decline.

Cable opened yesterday at 1.4534, but the pair fell to its lowest level for over a week as fresh Brexit concerns caused a Pound sell off in the morning session. The underwhelming US data helped to stop the slide, and the pair moved upwards to the 1.4500 level where it hovered around for the rest of the day. EURUSD traded quite flat for the day, as the Dollar gained fractionally against the common currency.

The Euro showed signs of strength in yesterday’s trading session as GBPEUR fell by half a percent. Although there was little change in the Markit PMI composite data for April, which printed at 53, the Euro pushed on due to weakness in the Pound.

The European economic bulletin is due to print this morning and will go over key talking points and issues raised by the governing council board meeting which took place two weeks ago. Any positive comments made by the publication will encourage Euro bulls to increase trading and may cause GBPEUR to fall further in today’s session, especially if data from the UK and US comes in weaker than expected.

Data to watch: 9.30am UK Markit Services. 10am Euro Economic Bulletin. 1.30pm US Initial Jobless Claims.

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