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Sterling under pressure following poor manufacturing readings

1st May 2018 Market Update

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?? GBP – The pound was able to stop the rot of 4-day consecutive losses yesterday and climbed slowly throughout the afternoon. With a lack of data releases from the UK, it is likely that Sterling benefitted from external movements from other currencies as well as traders taking profit from the recent drop off.

Manufacturing sector results were released at 09:30 and hit a 17 month low which was even worse than the expected lower reading. The pound has struggled as a result and if it sets the tone for the construction and services figures later in the week, then the pound could be set for another tough few days.

?? EUR – The Eurozone did not feature much data of note yesterday but still suffered heavily again versus the US dollar. The euro is now at a 3-month low against the Greenback. Preliminary German inflation figures for April disappointed which added to the consensus that the Eurozone is still suffering from inflation being on the soft side.

Today is Labour Day for much of the major economies in Europe which means that no data is released. This may result in the euro slipping further against its major pairs.

?? USD – Personal Consumption Expenditure readings moved to 2% for the year-on-year figure yesterday but lower than expected monthly readings helped the pound in gaining some ground against the Greenback in the afternoon. This measure is seen as the most important for gauging inflation in the US and will be key for the Fed in raising interest rates later in the year.

Manufacturing sector results will be released from the US at 14:45 and are expected to remain in line with March’s figure. A higher result may help the US dollar to stay on the front foot after a very strong week last week.

 

Key Announcements

?? GBP
09:30am: Manufacturing PMI results

?? USD
14:45pm: Manufacturing PMI results (exp. 56.5, prev. 56.5)

 

Summary: April has traditionally been a strong month for Sterling but it did not transpire this year with overall losses around 2%. The pound will be hoping for a significantly better month in May but this will largely depend on the interest rate decision on May 10th. In the meantime, the US dollar has taken advantage of Sterling and euro weakness and looks set to remain on the front foot through this week.

 

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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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