Sterling king of the ring whilst Dollar takes a beating
The US Dollar took a battering yesterday following a poor data day for the States. US non-manufacturing came in at 53.5, below the expected 55.1, while ADP figures also showed a slowdown in private sector job growth.
However, the real losses for the Greenback came after the Fed’s William Dudley expressed concerns about the market and the global downturn. Additionally, poor Markit Services PMI also weighed on the Dollar. EURUSD opened the day at 1.11, a marked appreciation from the 1.09 range we have seen of late. GBPUSD peaked as high as 1.4649 before receding slightly.
Sterling was further supported by better than expected services PMI yesterday and its gains could be extended following today’s “Super Thursday”. Although it is unlikely we will see a change from the 8 to 1 vote split, an updated revision to the Bank of England (BoE) projections could boost market expectations and fuel a larger Sterling fightback. Mark Carney has made it clear that the BoE are currently in “wait and see” mode, but any upward revision is likely to be interpreted as a boost to interest rate expectations and boost GBP strength.
There are no key data releases for the Eurozone today, though Draghi did deliver a relatively “motivational” speech this morning reiterating his enthusiasm to fight low inflation and hinting that more can and will be done by the European Central Bank (ECB). He mentioned, “even in the face of common global shocks, central banks have the ability to deliver their mandates.” Looking ahead, attention will shift to US jobless claims and factory orders data this afternoon, in the absence of major significant macro news in the EUR calendar.
Data to watch: 12pm BoE Asset Purchase Facility, Interest Rate Decision, Quarterly Inflation Report & BoE Minutes. 1.30pm US Initial Jobless Claims. 3pm US Factory Orders.