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Could Construction Data boost the pound further?

3rd May 2017 Market Update

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🇬🇧 GBP – The pound traded higher yesterday against both the US dollar and single currency after solid set of PMI manufacturing numbers gave investors some much needed joy as we headed into the final round of French Elections this weekend.

The PMI numbers were expected to come in at 54.0 but surprised investors with 57.3 reading hence the strong rise in Sterling. The Survey found the main source of new work came from the domestic markets, but there was also a solid increase in new export business due to a combination of better global economic conditions and the weakening pound.

Following on from yesterday’s manufacturing figures we have the second instalment in the way of the construction numbers, any higher ready will surely see the pound continue its impressive run against its major trading partners.

🇪🇺 EUR – The euro added further gains versus the greenback, as Eurozone manufacturing PMIs increased at the fastest rate for six years and demand remained strong, despite rising prices in Europe.

The main focus this week will be the outcome of the French Elections on Sunday. Party favourite Emmanuel Marcon holds a firm lead over his rival Marine Le Pen heading into the final round. However, as we have seen before, opinion polls may not always be a true indicator of what may actually happen.

From the Eurozone today the only piece of data comes in the form of the GDP numbers, we are expecting an unchanged figure of 1.7% on the year whilst a slight uptick to 0.5% on the quarter.

🇺🇸 USD – From across the Atlantic we had a very quiet day on the economic front with very little to report. The only interesting piece of news was a report that Donald Trump would be “keen” to meet North Korea leader Kim Jong-un “ under the right circumstances”.

We have a raft of data coming from the United States today, firstly form of the ADP jobs report where we are expecting a fall in the amount of jobs from last month’s 263,000 to 180,000. We also have the PMI services and ISM Non-Manufacturing, with both expected to come in ever so slightly higher.

Later in the evening we also have the Fed’s latest interest rate decision but no change is expected here.

 

Key Announcements

🇬🇧 GBP
9.30am: PMI Construction forecast to drop marginally to 52.

🇺🇸 USD
1.15pm: ADP Employment predicted to drop to 180,000.
2.45pm: PMI Services forecast to remain at 52.5.
3.00pm: ISM Non – Manufacturing forecast to climb to 58.
7.00pm: Fed Interest Rate Decision predicted to remain at 1%.

🇪🇺 EUR
10.00am: 1st Quarter GDP forecast to remain at 1.7%.

 

Our View: With many traders citing this Friday’s US jobs report and Sunday’s outcome of the French elections as the two most important pieces data in May. We will without question see some big moves over the next few days.
 
With data from the UK continuing to come in much better than expected, many see more upside in the direction of Sterling over the coming weeks. It “looks” as if we can firmly say that we have hit the lows on Sterling that we saw towards the end of last year.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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