Global Themes

  •  PMI’s providing Sterling unexpected lift
  •  A new range for EUR/USD?
  •  Dollar softens on July 4th

GBP

PMI’s providing Sterling unexpected lift 

GBP/USD has reclaimed the $1.32 handle and GBP/EUR is back above €1.13 after a better than expected construction PMI release yesterday. The PMI showed an increase to 53.1, the third consecutive month of growth in the sector and the fastest growth in seven months. This also beat the forecasts of 52.6 and followed the better than expected uplift in the manufacturing PMI number on Monday. Today at 9:30am is the release of the services PMI, which is the most critical of the three numbers as it makes up the bulk of the UK economy. The number for June is expected to be unchanged at 54.0, but market participants will be hoping it can follow the trend of this week and come in better than expected and give the pound another boost. Sterling only has a tentative hold on the USD and Euro levels above, so any disappointment in the number could see these quickly unravel.

  • According to ITV’s political editor Robert Peston in a story that is being widely covered this morning across media outlets, it has been suggested that Prime Minister Theresa May will present plans to the cabinet on Friday that will be for the 'softest possible Brexit' in relation to customs arrangements with the European Union. Although a softer Brexit is being pushed for by business leaders and would be a positive for Sterling, the huge splits it would cause in the cabinet could bring huge pressure on the PM, and from Brexiteers on the backbench. The reports have not been confirmed by Number 10, and there are bound to be claims and counter claims before Friday’s crunch talks begin.


Euro

A new range for EUR/USD? 

Back in January 2017, EUR/USD tumbled to 14-year lows around $1.03, having spent the most part of the two years prior range-bound, bouncing between circa $1.08 to circa $1.15. It was around mid-January 2017 and following the inauguration of US President Donald Trump, that EUR/USD began its ascent back into the aforementioned range and beyond. In fact, the pair rose higher ten months out of the succeeding fourteen and touched fresh 3½-year highs of $1.2555 in February this year. What followed was a period of consolidation between $1.22 to $1.24 for nine weeks, lacking any directional conviction until the pair broke out to the downside and clocked six consecutive weeks of losses.

Political chaos in Europe and broad-based USD strength, partly due to increasing monetary policy divergence with US interest rates on the rise, allowed EUR/USD to plunge over 10-cents from the year high to $1.15. What was the ceiling of the range back in 2015-2016 could potentially be the floor of this year’s higher range as we’ve seen the pairs drop halted and supported around this zone.

  •  A tepid 2-week recovery since hitting this floor has seen EUR/USD float between $1.16-$1.17, with a strong breakout above $1.17 still needed to confirm a continued uptrend. Traders eagerly await Eurozone services PMI data at 9:00am for fresh directional impetus this morning.

USD

Dollar softens on July 4th 

Today is Independence Day in America, which tends to mean market liquidity thins out. Overnight the US Dollar index weakened slightly whilst emerging market currencies rallied, indicating a risk-on appetite (source: Reuters). Despite the day of rest for the dollar, the last two days of the week could see the dollar move vigorously before the week is out. Currently, USD/JPY finds upside moves capped at ¥111, with this morning trading at ¥110.36. The pair has been bouncing between ¥111 and ¥109 for the past two months. Against the Canadian Dollar, USD/CAD has dropped as a result of rising oil prices.

Market participants have ISM non-manufacturing PMI tomorrow, which is forecast to fall slightly to 58.3 from 58.6 for the period of June. The minutes of the Federal Reserve’s June meeting will also be revealed tomorrow and comes ahead of the day when the US is set to impose tariffs worth $34 billion on Chinese goods. This could be considered a risk-off event, which could strengthen the dollar sending it higher against its peers again. Finally, Friday will also see the release of the non-farm payroll figure, which is set to fall to 195k from 223k for June. Though this number seems to have become less significant for the central bank in determining policy, it still shows the world a snapshot of the health of the economy.

  •  It should be noted that there will be no same day value for this currency due to the US holiday today.


*The rates displayed by our free currency converter are neither "buy" nor "sell" rates, but interbank rates, the wholesale exchange rates between banks. Interbank rates don’t include the spreads, handling fees, and other charges that may be assessed by foreign exchange providers. Please note that, as such, these rates are provided for indicative purposes only. Prior to booking a transaction, Western Union Business Solutions will advise you of the actual rate then available for a particular currency transaction.

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