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The Pound gets pounded

The Pound gets pounded

Sterling fell to its lowest level against the Euro since September 2014 yesterday, as Brexit concerns continue to drag down the currency. The monthly Purchasing Managers Index (PMI) survey of the service sector was released and showed an improvement on the previous month. However, the data did not translate into Sterling strength as the currency lost ground against all major pairs. With the June referendum approaching and the opinion polls showing that the vote could go either way, it is hardly surprising to see that the Pound remains so vulnerable.

US non-manufacturing PMI came in unexpectedly high yesterday, adding to Sterling’s woes, and generating further strength for the Dollar against the Pound. Although the gains were predicted by the market, US ISM non-manufacturing PMI reached 54.5 for March from the 53.4 figure seen in February. This further added to the USD strength seen earlier in the day, meaning Cable could not recover above 1.4150 towards the European close.

Today, focus for the financial markets will be on the Federal Open Market Committee (FOMC) March minutes due this evening, accompanied by speeches from FOMC members Mester and Bullard. The market is expecting a very dovish set of minutes as Chair Yellen has already explained why the FOMC thinks that two hikes are appropriate this year, rather than the originally projected four. The Dollar will be left to market sentiment throughout the day ahead of tonight’s minutes and unemployment claims tomorrow.

The single currency also strengthened against Sterling in yesterday’s session as economic data out of the Eurozone printed above the 50 mark. Both Markit Services PMI and Markit Composite PMI came in at 53.1 for the month. This has resulted in GBPEUR falling by more than half a percent, trading back around the 1.24 area we saw at the beginning of the week.

Against the Dollar, the Euro is facing strong resistance around the 1.14 area as it has failed to break past this barrier for a fourth day running. With no economic data due for the bloc other than European Central Bank (ECB) non-monetary policy meeting data, expect more sideways trading.

Data to watch: 8am ECB Non-Monetary Policy meeting. 7pm US FOMC Minutes.

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