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Pound (GBP) Upbeat before Services, EUR Under Pressure from ECB

Published: 3 Jul at 11 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, France, Germany, Italy, South Africa,

Pound (GBP)

Positive Manufacturing PMI has proved greatly supportive for the Pound this week with the currency currently trading at 1.7151 against the US Dollar, reviving hopes of an interest rate hike before Christmas. EEF representative, Lee Hopley, stated: ‘We’ve seen a big focus on new product and service innovation across industry over recent years and this survey provides a bit more evidence that this is paying off with companies securing new business off the back of it.’ Thursday will reveal Markit Composite and Services PMI, which have been forecast to fall slightly; however, despite the possibility of falling data, the Pound may be able to remain stable after weeks of building strength.

Euro (EUR)

Thursday brings an influential day for the Euro, by way of heavy data releases. The Eurozone will see a range of PMI data for Italy, France, Germany and the Eurozone as a whole alongside ECB decisions regarding Central Bank Rates, Marginal Lending Facility and Deposit Facility, however, these ECB figures aren’t predicted to change. The Euro has been affected by falling goods prices falling in May, meaning the potential to recover from low inflation seems unlikely in the near future. Economist Howard Archer stated: ‘The further dip in producer prices in May is clearly unwelcome news for the ECB as it points to consumer price inflation remaining very low. However the ECB is clearly going to sit tight for now at least while the interest rates and liquidity measures it announced at its June meeting increasingly kick in.’

US Dollar (USD)

Yesterday saw a positive day for US employment Change statistics with the previous figure of 179K and the forecast figure of 205K being shattered bywith the an actual result of data that revealed 281K.; Hhowever, the positive impact of this impressive employment change was a little limited as US Factory Orders also fell from the former 0.7% to -0.05%. Following the data releases, Federal Reserve Chairwoman, Janet Yellen, delivered a speech discussing her reasoning for not wishing to raise interest rates in the near future, citing it as a means by way of protecting the country from economic collapse. Yellen stated: ‘Monetary policy faces significant limitations as a tool to promote financial stability. Its effects on financial vulnerabilities... are not well understood and are less direct than a regulatory or supervisory approach; in addition efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment.’

Canadian Dollar (CAD)

The Canadian Dollar has reached highs of 0.9387 so far on Thursday after Manufacturing PMI was published showing a rise from the former 52.2 to 53.5, which pointed toward a healthy expansion in the manufacturing sectording economy. With positive data received for Chinese manufacturing at the beginning of the week, commodity based currencies such as the ‘Loonie’, the ‘Kiwi’ and the ‘Aussie’ have all received strengthened. However there is discomfort at the prospect of the ‘Loonie’ gaining too much strength; Scotiabank currency specialist, Camilla Sutton stated: ‘Is it sustainable that CAD sits at 94? It’s probably making the Bank of Canada incredibly uncomfortable, as well as exporters.’

Australian Dollar (AUD)

The Australian Dollar has dropped slightly on Thursday, ranging from highs of 0.9444 to lows of 0.9364 as a result of after poor Trade Balance statistics and the Reserve Bank of Australia stating that they feel that the ‘Aussie’ may be set to fall quite significantly. RBA governor Glenn Stevens assured: ‘Lest there be any uncertainty about this, let me be clear again, that the exchange rate remains high by historical standards. When judged against current and likely future trends in the terms of trade, and Australia’s still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents.’ As expected, following Stevens’ statement the ‘Aussie’ fell against the US Dollar by 0.5 cents.

New Zealand Dollar (NZD)

The New Zealand Dollar has had chance to gain against the ‘Aussie’ after the RBA stated they expected the Australian Dollar to fall., and poor Poor Australian Trade Balance data has also aided the NZD/AUD advance. The ‘Kiwi’, which softened against the ‘Aussie’ at the start of the week, has gained back some momentum and is currently trading against the Australian Dollar at 0.9350. Currency expert for the Bank of New Zealand Kymberly Martin stated: ‘Weakness in the Australian Dollar was initially inspired by yesterday afternoon’s release of the Australian Trade Balance. As there is no data scheduled on the domestic agenda today, the New Zealand Dollar/Australian Dollar cross will take its cues from Australian data releases.’

South African Rand (ZAR)

Thursday sees the resumption of talks between NUMSA and employers over wages and working contracts in South Africa. With no production undertaken since the start of the strike at one of South Africa’s most prominent steel makers—Scaw, the outlook of another prolonged strike could cripple the South African economy. Human Resource representative from Scaw, Bheka Khumalo has suggested the effect of the strikes stating: ‘We are talking about probably 80% of employees not reporting for work.’
As of Thursday, 3rd July 2014, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.2604, GBP USD exchange rate was 1.7153, GBP AUD exchange rate was 1.8351, GBP NZD exchange rate was 1.9601, GBP CAD exchange rate was 1.8251, GBP CNY exchange rate was 10.6557, and GBP ZAR exchange rate was 18.4376.
Dominic Lee About Author: (473 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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