A weaker-than-expected UK construction PMI added to the downside pressure on the Pound, following on from a similarly disappointing manufacturing result.
While the construction sector remained in a state of growth it nevertheless slowed in March, with the PMI slipping from 52.5 to 52.2.
As Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement and Supply, noted:
‘Where the housing sector acted as the main engine of growth over the last four years, this month it was slower and stuttering, while overall purchasing activity in the construction sector was disappointingly tame, shackled by a lack of new orders and rising costs.’
This softer showing suggests that the economy did not end the first quarter on the strongest note, raising concerns as Brexit-based uncertainty is only set to mount further.
Further volatility for GBP exchange rates is anticipated in response to Wednesday’s services PMI, which is forecast to show a modest uptick.
Given that the service sector accounts for the vast majority of the UK’s economic activity a positive result here could offset any worries over March’s other PMIs.
However, if the data points towards a similar slowing of growth this could prompt the Pound to extend its recent losses further.
Eurozone retail sales bettered expectations in February, meanwhile, offering support to the Euro as consumer spending picked up.
Even so, the strength of the single currency was hampered by jitters ahead of the second debate in the French presidential race and the latest developments in Greece.
As another anti-austerity protest took to the streets of Athens markets continue to expect the resolution of the ongoing bailout review to take some time yet, raising the prospect of a fresh crisis.
If fears of a populist upset in France mount once again this could offer the Pound Euro exchange rate a rallying point, with investors reluctant to place too much trust in the current opinion polls.
A general increase in safe-haven demand benefitted the US Dollar, which trended higher against the majors even as doubts continued to circulate over the abilities of the Trump administration.
The appeal of the ‘Greenback’ also strengthened in response to a substantial narrowing of February’s trade surplus, which saw imports slump -1.8% on the month.
While the message from members of the Federal Open Market Committee (FOMC) remained cautious, maintaining that interest rates are likely to rise gradually, this was not enough to shore up the GBP USD exchange rate.
Confidence in the US economy could weaken, however, if the ISM non-manufacturing composite index shows a slowing on the month.
March’s FOMC meeting minutes will also be in focus, with any further indications of dovishness likely to undermine demand for the US Dollar.
Current GBP EUR USD Interbank Exchange Rates
At the time of writing, the Pound Euro exchange rate was slumped in the region of 1.16. Meanwhile, the Pound US Dollar exchange rate trended lower in the region of 124.