Pound (GBP) Trending Narrowly Today ahead of Bank of England (BoE) Rate Decision
Yesterday’s US ADP Employment Change and ISM Non-Manufacturing Composite bettered expectations, pushing the ‘Greenback’ (USD) to a fresh round of bullishness. However sentiment has somewhat calmed this morning ahead of the latest Bank of England (BoE) Rate Decision and meeting minutes, with both the GBP/EUR and GBP/USD exchange rates trending narrowly.
With the single currency (EUR) weighed down by the deepening Volkswagen scandal this morning, the Pound (GBP) has been on strong form as a result of a better-than-expected UK Services PMI.
Pound Sterling (GBP) Exchange Rates Bullish as UK Services PMI Betters Forecast Today
Following Monday’s unexpectedly positive UK Manufacturing PMI the Pound (GBP) remained on relatively strong form yesterday. Although the domestic Construction PMI showed a dip in expansion on the month, the sector remained well within the margin of growth at 58.8. As traders were not particularly surprised by this result Sterling continued its uptrend against the majority of rivals, with confidence in the currency boosted by the relatively positive nature of the data. This appeared to bode well for today’s UK Services PMI, upon which the most weight is placed due to the service industry accounting for the largest portion of the national GDP.
Trader’s optimism was vindicated this morning when the Services PMI printed above forecast, at 54.9 rather than 54.5, to indicate that the sector had continued to expand solidly in the last month. As a result the Composite index was also pushed up, suggesting that the domestic economy is recovering well in spite of recent negative headwinds. Offering some reassurance ahead of tomorrow’s Bank of England (BoE) Rate Decision and meeting minutes, this saw the Pound making further gains.
Euro Currency News: EUR Dovish Today with Fresh Revelations in Volkswagen Emissions Scandal
Once again the Volkswagen emissions scandal has returned to weigh on the prospects of the Euro (EUR), after US regulators accused the carmaker of having ‘defeat devices’ installed within a number of additional models. Overnight the company admitted that 800,000 vehicles were affected by inaccurate carbon dioxide emission data, not all of which are thought to be diesels. Investors have been quick to move with this latest revelation having potentially more severe consequences for Volkswagen and the wider German economy. In response the Euro (EUR) has also slumped across the board this morning.
European Central Bank (ECB) President Mario Draghi has also been talking down the common currency, reiterating the willingness of policymakers to introduce fresh monetary loosening in the near future. As such, it seems unlikely that the Euro will be seeing any improvement in outlook over the coming day.
Stronger than Predicted ISM New York Index Boosted US Dollar (USD)
While yesterday’s US Factory Orders did not prove as strong as pundits might have liked, improving on the month but still printing at a contraction of -1.0%, the ‘Greenback’ (USD) saw a decided boost in demand. This was largely due to the publication of the ISM New York Index, which pleasantly surprised markets by surging from 44.5 to 65.8 in October. Suggesting that business within the state had experienced a considerable improvement on the month this prompted traders to buy back into the US Dollar, lending some support to the likelihood of a December interest rate rise from the Fed.
Further volatility is likely for the ‘Buck’ on this afternoon’s domestic ADP Employment Change and ISM Non-Manufacturing Composite figures.
Current GBP, EUR, USD Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the range of 1.4113, while the Pound Sterling to US Dollar (GBP/USD) pairing climbed around 1.5427. Meanwhile, the Euro to US Dollar (EUR/USD) conversion rate was slumped in the region of 1.0925.