GBP Awaits Manufacturing Release

Sterling faces another potential hurdle from manufacturing data today. US Manufacturing PMI and Canadian GDP are in focus this afternoon.

Previous Day's Market Highlights

The dollar remained relatively bid yesterday. This saw euro-dollar break back below 1.21 and sterling-dollar inch lower towards 1.37, its lowest levels since mid-January and a 4.6% decline from the post-referendum highs cable had hit earlier in the month. Personal Consumption Expenditures rose in line with forecasts to 1.9%, supporting the dollar, whilst Personal Income figures and Pending Home Sales disappointed expectations. A softer euro saw sterling-euro test 1.14.
 
Germany’s Harmonized Index of Consumer Prices softened to 1.4% from 1.5% year-on-year, which will reduce expectations for the next Eurozone inflation print. Inflation in the Eurozone was 1.3% in March. Overnight, the RBA kept interest rates on hold at 1.5% as was widely expected.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1401 1.1600 1.1328 2.34%
GBP/USD 1.3751 1.4376 1.3712 4.62%
EUR/USD 1.2060 1.2414 1.2055 2.89%
GBP/AUD 1.8271 1.8478 1.8168 1.68%
GBP/NZD 1.9565 1.9755 1.9171 2.96%
GBP/CAD 1.7651 1.8146 1.7660 2.84%

Today's Market Highlights

A softer Manufacturing PMI reading this morning could add to the pound’s woes (09:30 BST). In the afternoon, Canada releases monthly GDP figures, where a pick-up in growth after last month’s 0.1% contraction could strengthen the loonie (13:30). Manufacturing is also forecast to have slowed in the US, with the ISM Purchasing Managers’ Index forecast to have slipped from 59.3 to 58.4.
 
BoC Governor Poloz is to speak on Canadian household debt this evening (19:30), with the text of the speech to be released ahead of the speech, but the comments may have limited impact unless there are monetary policy clues. Poloz has recently struck a cautious tone on any additional hikes. Overnight, New Zealand releases labour market data; slower growth in quarterly Employment Change could weigh on the kiwi dollar.
 
The Fed is expected to keep interest rates on hold tomorrow but to leave the door open for a hike in June, which is currently being almost completely priced in by markets. Nuance will be key, particularly regarding the Fed’s latest views on the economy and inflation and whether there are any signals of a growing call for a fourth hike. There may be limited dollar movement unless there are any notable surprises.
 
Politics will remain in focus this month as the UK holds local elections on the 3rd and the post Brexit customs union debate continues ahead of the June EU summit. Investors will also keep an eye on any trade developments from the US.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Markit Manufacturing PMI (Apr) 54.8 55.1
09:30 GBP Mortgage Approvals (Mar) 63.00K 63.91K
13:30 CAD GDP MoM (Feb) 0.3% -0.1%
14:30 CAD Markit Manufacturing PMI (Apr) 55.6 55.7
15:00 USD ISM Manufacturing PMI (Apr) 58.4 59.3
NZD Global Dairy Trade Price Index 2.7%
19:30 CAD BoC Governor Poloz Speaks
23:45 NZD Unemployment Rate (Q1) 4.5% 4.5%
23:45 NZD Employment Rate (Q1) 0.4% 0.5%

Caxton