The Pound digs its heels in
Sterling managed to hold levels against both the Euro and the Dollar yesterday amidst uncertainty in the UK economy. The goods trade balance came in as expected at -£11.2bn, consequently there was a muted reaction from the currency market.
However, the overall first quarter deficit in goods and services was the highest it has been for eight years at £13.3bn, with a 0.1% decline in exports and 1.5% increase in imports. This further enforces the negativity surrounding the UK economy, and shows the impact of the uncertainty caused by a potential ‘Brexit’.
Today’s economic calendar will see the release of monthly manufacturing data for March. It is predicted to show a growth of 0.4% after February’s retraction. The previous -1.1% figure will need to be avoided if Sterling is to continue yesterday’s positive trend. An unexpected contraction, coupled with the ‘Brexit’ fears and the recent disappointment from PMI readings, would likely see GBPUSD fall below the 1.44 resistance that it managed to sustain yesterday.
The latest US job openings data was released yesterday, posting an eight month high of 5.76mn for April. The figure came in above the market consensus of 5.43mn, and helped to underpin the confidence in the US labour market. While the data will no doubt please the Federal Reserve ahead of the interest rate decision in June, the lack of first tier data releases and no comments from Fed officials meant that the overall market reaction was minimal for the Dollar.
The Dollar’s five day winning streak finally came to an end yesterday, as the Sterling bulls took control to post gains for the Pound for the first time since last Monday. The pair opened yesterday at 1.4407, and tested the 1.4470 level in the morning session and in the US session, but failed to maintain above that. The Dollar did fight back to halt the upward momentum, and the pair opened this morning at 1.4442.
EURUSD continues to struggle for a clear direction with the 1.1400 level seeming a step too far, as any move above that level is being met with a strong Euro sell off. The Dollar bulls did come out on top for the sixth straight day, with EURUSD opening this morning at 1.1372.
The Euro weakened against the Pound during yesterday’s European trading session as weaker than expected German industrial production saw the single currency trade nearly half a percent lower versus Sterling. The figures printed in at -1.3%, 0.6% lower than last month’s figures.
The Euro was dealt a second blow as French industrial production figures put further pressure on the currency – the data came in at -0.3%, 0.2% lower than consensus. As a result of the weak data, GBPEUR ended the day just above the 1.27 levels. There is no data due today from the Eurozone, but important figures are expected in the United Kingdom which may cause volatility for the Euro against Sterling in the day ahead.
Data to watch: 9:30am UK Manufacturing Production month-on-month, UK Industrial Production month-on-month, 3:00pm UK NIESR GDP Estimate, 3:30pm US Crude Oil Inventories.
Curious about Brexit and British Expat following our survey? Solicitors Turcan Connell kindly shared their insights with us, read more here.