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Pound Falters as Construction Sector Outlook Weakens

Pound News: GBP Slumps on Weaker Construction PMI

Demand for the Pound (GBP) weakened sharply on Wednesday on the back of a disappointing December construction PMI.

Particularly concerning was the subdued nature of longer-term confidence amongst construction firms, with the report’s measure of sentiment falling to its lowest level since mid-2013.

Even so, if today’s UK services PMI proves positive, this could offer the Pound a rallying point given that the service sector accounts for more than three quarters of gross domestic product.

 

Euro News: Record Low German Unemployment Failed to Boost EUR

Downside pressure on the Pound to Euro (GBP/EUR) exchange rate was somewhat limited even though the German unemployment rate unexpectedly fell to a record low of 5.5%.

While the Eurozone’s powerhouse economy continues to demonstrate strength, markets are unconvinced by the prospect of the European Central Bank (ECB) returning to a monetary tightening bias any time soon.

Reaction to the finalised raft of Eurozone services PMIs is likely to be relatively muted, leaving the Euro (EUR) with limited opportunity for a resurgence today.

 

US Dollar News: USD Recovered Ground on Strong Manufacturing Data

The US Dollar (USD) was able to recover some of its lost ground yesterday, as investors piled back into the currency in the wake of a positive ISM manufacturing index.

This left the Pound to US Dollar (GBP/USD) exchange rate on a sharp slump as confidence in the underlying health of the world’s largest economy improved once again.

Further gains could be in store for the US Dollar this afternoon, providing that the ADP employment change figure strengthens and points towards a bullish non-farm payrolls report.

 

Canadian Dollar News: Bullish Oil Prices Continue to Support CAD

Oil market bullishness continued to support the Canadian Dollar (CAD) on Wednesday, as ongoing civil unrest in Iran raises the risk of a supply disruption.

Even so, the softening of the Pound to Canadian Dollar (GBP/CAD) exchange rate was somewhat limited as a general decline in market risk appetite weighed on the commodity-correlated CAD.

With the Canadian producer price index forecast to have weakened on the month in November, suggesting softer inflationary pressure, the mood towards the Canadian Dollar could sour further.

 

Australian Dollar News: Dip in Copper Failed to Dent AUD

Even in the absence of fresh Australian data the Pound to Australian Dollar (GBP/AUD) exchange rate came under increased pressure.

Although copper prices fell back from their recent highs anticipation of greater Chinese demand for base metals in the coming months kept the Australian Dollar (AUD) on a stronger footing.

AUD exchange rates could gain further traction overnight if the Australian trade surplus is shown to have widened further in November.

 

New Zealand Dollar News: GBP/NZD Falls on Disappointing UK PMI

Markets continued to lack any real incentive to favour the New Zealand Dollar (NZD), although this did not stop the antipodean currency making some fresh gains on Wednesday.

While a certain degree of market unease remains over the New Zealand political outlook the Pound to New Zealand Dollar (GBP/NZD) faltered, trending lower as investors bought back into the cheaper NZD.

As no fresh domestic data is due for release ahead of the weekend NZD exchange rates may struggle to hold onto any particular positive momentum for long.

 

Upcoming Data

Thursday, 04 January, 2018

08:55     German Services PMI

09:30     UK Net Consumer Credit

09:30     UK Services PMI

13:13     US ADP Employment Change

13:30     Canadian Producer Price Index

Joe Mayhew

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