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Sterling surges against dollar

Sterling surges against dollar

GBP

UK manufacturing PMI figures printed at 40.7, edging ahead of preliminary estimates of 40.6. Orders contracted sharply and unemployment also continued sharply but there were expectations of a limited recovery in the June data as production resumes. The lack of confidence in UK economic outlook remains but the easing of lockdown measures provided a mild boost to sentiment. Better risk appetite and gains in commodity currencies lifted Sterling enabling a surge to 1.2500 on the Dollar the Euro fell sharply to near 1.1205 by the closing bell.

The resumption of UK/EU post-Brexit trade talks and the rhetoric employed will be scrutinised, although admittedly expectations of a breakthrough are low. There were some reports that the UK was prepared to make concessions of fisheries and ‘level playing field’ issues if the EU moved first.

This morning Sterling continues to test the 1.2500 mark on the Dollar while the Euro has found some support just below the 1.1235 level.

 

USD

The final May US manufacturing PMI reading was unchanged from the flash reading of 39.8. The ISM manufacturing index recovered to 43.1 for May from 41.5 previously and close to consensus forecasts, although this was still the second-lowest reading on record. There were also tentative recoveries for new orders and production for the month, although the readings also remained close to record lows. Employment and prices also declined at a faster slower pace.

The US data will maintain expectations of a slow rebound within the industrial sector, especially with overseas demand still weak. The non-manufacturing data will be watched closely on Wednesday given that services have been hit hard by lockdown measures.

Overall dollar demand remained weaker as global risk appetite held firm. In particular, there were sharp gains for commodity currencies with the Australian dollar posting a daily gain of over 2%. 

The dollar secured only a minor recovery this morning as underlying US demand remained weaker trading with the Euro around 1.1135 and sterling around 1.2470.

 

EUR

The Italian and Spanish May PMI manufacturing readings were above consensus forecasts with a recovery in the Italian index to 45.4 from 31.1 previously. The overall reading was marginally lower to 39.4 from the flash reading of 39.5. The Euro was unable to make further headway after the data, with strong resistance coming in at 1.1150 against the Dollar. The single currency, however, continued to gain underlying support from increased optimism over the outlook and hopes that there would be a political agreement for a substantial fiscal package. 

The ECB is expected to announce further bond-buying at Thursday’s meeting. As or writing, the Euro trades around the 1.1130 level against the Dollar.

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