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Bank of England Bets Boosted by UK Services PMI, Eurozone Growth Outlook Improves

Pound News: Hat Trick of Solid UK PMI Results Bolsters BoE Bets

Following stronger than forecast UK manufacturing and construction stats earlier in the week, Wednesday’s UK services PMI rounded out June’s PMIs with a hat trick of strong figures.

The UK services PMI unexpectedly improved to its best level in seven months, making investors more confident that Britain’s economy had rebounded from the poor performance seen earlier in the year. Bank of England (BoE) interest rate hike bets improved following the news and Sterling strengthened.

Most of this week’s most notable UK data has been published already, so the Pound outlook is unlikely to change today unless Bank of England (BoE) Governor Mark Carney makes any surprising comments on UK monetary policy.

 

Euro News: Eurozone PMIs Impress but Trade Jitters Weigh

Euro sentiment improved a little on Wednesday following the publication of the Eurozone’s latest services and composite PMI results. The PMI figures beat forecasts, indicating that the Eurozone’s economy might have picked up following the slowdown earlier in the year.

However, the Euro was unable to withstand the Pound’s gains as other factors still weighed. Protectionist trade rhetoric from the US, as well as the Eurozone’s latest disappointing retail sales stats, limited the Euro’s appeal.

The Euro could see stronger demand towards the end of the week though, if today’s German factory orders and Eurozone retail PMI stats impress investors.

 

US Dollar News: USD Trade Quiet on Independence Day

There was little change in the US Dollar on Wednesday, as US markets remained closed to observe the 4th of July Independence Day holiday.

The Pound to US Dollar exchange rate easily edged higher thanks to the quieter session and the latest UK services results. However, market demand for safe currencies amid trade war jitters kept the US Dollar appealing and limited its losses.

US Dollar trade is likely to be a lot busier towards the end of the week though, as the Federal Reserve’s latest anticipated meeting minutes will be published this evening and US Non-Farm Payroll data will be published tomorrow.

 

Canadian Dollar News: GBP/CAD Edges Higher on UK Services Results

A surprisingly resilient Canadian Dollar kept the Pound to Canadian Dollar exchange rate trending within a tight range for first half of the week, but on Wednesday the pair began to edge higher due to strong UK services stats.

Following Canada’s stronger-than-expected manufacturing PMI data on Tuesday, the Canadian Dollar didn’t have much support on Wednesday. The currency’s losses were limited though thanks to strong oil prices.

The Canadian Dollar will likely continue to be driven by trade and commodity news today, as investors highly anticipate Friday’s Canadian job market and trade balance results.

 

Australian Dollar News: AUD Slips Despite Stronger Exports and Retail Sales

While Australia’s May retail sales results, May exports figures and June services PMI all came in solidly, they weren’t enough to help the Australian Dollar hold its ground against a stronger Pound.

The Australian Dollar’s Wednesday weakness was partially due to a lower than expected Australian trade balance in May, and persistent concerns about the possibility of a US-China trade war.

Trade developments and the strength of the US Dollar (USD) may influence Australian Dollar trade today, but otherwise investors may be more likely to await Friday’s Australian construction PMI.

 

Upcoming Data

Thursday, 5th July

07:00 German Factory Orders

09:10 Eurozone Retail PMI

11:00 BoE Carney Speech

13:15 US ADP Employment Change

14:45 US Markit Composite PMI

15:00 US Non-Manufacturing PMI

19:00 Fed Minutes

 

Joe Mayhew

Senior Currency Broker

jam@fcgworld.co.uk

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