Pound under pressure
Sterling moved to a slightly weaker note yesterday and was kept under pressure by uncertainty over the terms of Brexit, though some analysts said the currency was becoming less sensitive to domestic political developments.
The Pound showed losses versus the Dollar, Euro and Yen. Yesterday’s UK manufacturing Purchasing Manager’s Index (PMI) data was the principal catalyst, noting that momentum is slowing and would likely continue to do so over the next three months. This pointed to rising costs and weak wage growth. Investors are now factoring in downside risk to today’s release of the March services PMI report.
The Dollar loosened its grip on earlier gains against the Yen overnight, remaining under pressure after North Korea fired a ballistic missile into the sea ahead of a summit between U.S. and Chinese leaders. Pyongyang’s test-fire came just a day before U.S. President Donald Trump and his Chinese counterpart Xi Jinping meet for talks on economic and security issues, including persuading North Korea to curb its arms development.
The perceived safe-haven Japanese currency tends to gain in times of geopolitical tension or risk aversion. Concerns about the upcoming China-U.S. summit undermined the greenback, which is also under pressure from rising speculation that Trump will face challenges implementing his promised growth-boosting policies. This comes in the wake of his administration’s failure to pass healthcare reform. “People want to wait and see how Trump can carry out his promises when it comes to infrastructure” and tax reform. The Trade-Weighted Dollar (against a basket of six peers) was slightly down on the day at 100.52, as slumping U.S. Treasury yields also gave investors little incentive to buy the greenback.
Eurozone retail sales data was stronger than expected with a 0.7% increase for February, but this did not have a significant impact. The Euro continued to be undermined as German yields edged lower once again, with further speculation that the European Central Bank (ECB) would be very slow to remove monetary stimulus.
Data to Watch: 8:00am EUR Non-monetary policy’s ECB meeting. 8:15am ESP EUR Markit Services PMI (Mar). 8:55am GER EUR Markit Services PMI (Mar), Markit PMI Composite (Mar). 9:00am EUR Markit Services PMI (Mar), Markit PMI Composite (Mar). 1:15pm USD ADP Employment Change (Mar). 2:45pm USD Markit Services PMI (Mar), Markit PMI Composite. 3:00pm ISM Non-Manufacturing PMI (Mar). 7:00pm USD FOMC Minutes.