Surprise negative US Data allows Sterling to soar (until Thursday?)
Friday saw US Q2 GDP data printing much worse than consensus with growth at 1.2%, down from 2.6% previously. Although consumer spending was stronger than expected, growth was undermined by a sharp decline in investment and a slide in inventories, making a near-term interest rate rise appear unlikely.
Following this data the Dollar fell sharply against both Sterling and Euro as the US sentiment shifted. GBPUSD rose more than 130 pips to reach its highest level (1.3306) in two weeks and EURUSD rose from 1.1078 to 1.1177, putting overall weekly losses at 2% for the Dollar.
Today July ISM Manufacturing PMI data will be released from the States. Following Friday’s strong Chicago PMI data, the market anticipates a positive figure for the month, with a consensus of 53.1. Construction Spending and Manufacturing Prices data will also be released later today.
There was another volatile day for Sterling on Friday following stronger than expected lending data in the morning and unexpected weak data from elsewhere. After the Bank of Japan left rates unchanged at -0.1%, GBPJPY fell from 139.30 to fresh two-week lows of 135.50. The Yen strengthened as the expected interest rate cut in Japan to -0.3% didn’t materialise
There is room for further volatility today with UK Manufacturing PMI data due for release at 9.30am. However as the flash data was printed only last week, markets have priced in a PMI figure of 49.1 already.
The Euro strengthened versus Sterling by 0.49% over the weekend as Eurozone GDP Q2 figures met consensus at 1.6%. Further buying of the single currency was seen as the Euro Consumer Price Index for July beat expectations by 0.1%, coming in at 0.2%. The Euro opened around the 1.1820 levels this morning and the only noteable Euro data released today is the Markit Manufacturing PMI report for July.
Data to Watch: 9am EUR Markit Manufacturing PMI (July). 9:30am UK Markit Manufacturing PMI (July). 3pm USD ISM Manufacturing PMI (July), ISM Manufacturing Prices.