Pound Sterling (GBP) Softens in Anticipation of UK Services PMI Today
Ahead of the latest UK Services PMI the Pound (GBP) has returned to a downtrend, with markets wary of disappointment. In spite of talk regarding a potential buyout of Tata Steel’s UK assets the mood towards Sterling has faltered on Tuesday morning, leaving the Pound Sterling to Euro (GBP/EUR) exchange rate trending narrowly at 1.2518, while the Pound Sterling to US Dollar (GBP/USD) pairing was slumped around 1.4224.
After the weekend demand for the Pound (GBP) has risen on the back of the latest domestic construction data, while the Euro (EUR) is on muted form as Greece resumes debt talks with its lenders.
Steady UK Construction PMI Bolsters Pound Sterling (GBP) Exchange Rate
Pound Sterling (GBP) has been recovering some of its recent losses at the start of the new week, regardless of the dark cloud of uncertainty that continues to hang over the local steel industry. Confidence has been shored up by March’s Construction PMI, which bettered expectations to hold steady on the month at 54.2. While the UK construction industry remains in its weakest state of expansion for three years, the lack of fresh slowing has helped to improve the appeal of the softened Pound.
Should Tuesday’s Services PMI demonstrate the stronger uptick in sector growth that investors are anticipating Pound Sterling could extend its recent gains. With the service sector the main driver of the UK economy, contributing 80% of the country’s GDP, the relative strength or weakness of this particular result is likely to determine the direction of the Pound for some days to come.
Euro (EUR) Weakens with Greek Debt Negotiations to Resume Today
Somewhat unsurprisingly Greece has returned to the headlines this morning, with worries over the country’s fraught bailout process dragging on the Euro (EUR). Reports have suggested that individuals at the IMF had considered threatening to pull out of the latest Greek bailout in order to speed up talks on debt relief, an allegation that has alarmed investors. With lenders meeting to resume talks over the nation’s finances today markets are also a little jittery over the potential for further delays, particularly as these accusations against the IMF have dampened the general mood.
Investors have not been overly encouraged by the latest Eurozone Sentix Investor Confidence Index, as sentiment failed to improve as far as anticipated to clock in at 5.7 rather than 7.0. Thus, despite safe-haven demand being on the rise once again in the wake of further commodity weakness, the single currency has been trending lower against many of the majors today.
US Dollar (USD) Exchange Rate Extends Gains after Bullish US Data
The US Dollar (USD) has continued to push higher against both the Pound and the Euro on Monday morning, in spite of an unexpected rise in the US Unemployment Rate ahead of the weekend. Markets had been largely reassured, however, by a smaller-than-forecast decline in the Non-Farm Payrolls headline figure, as 215,000 rather than 205,000 new jobs were reported. An unexpectedly large leap in the ISM Manufacturing Index also shored up demand for the ‘Greenback’ on Friday, with the domestic manufacturing sector posting growth of 51.8 after February’s decidedly weaker 49.5.
Tomorrow’s ISM Non-Manufacturing Composite Index could fuel further US Dollar bullishness, with forecasts pointing towards a strong uptick from 53.4 to 54.1. Although Fed Chair Janet Yellen has maintained a more dovish tone with regards to monetary policy, the fact that policymakers have been stressing the data-dependence of future interest rate decisions has been encouraging speculation of a more imminent hike.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending higher at 1.2490, while the Pound Sterling to US Dollar (GBP/USD) pairing was slumped in the region of 1.4206. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate trending lower around 1.1373.