Daily Currency Update
GBP/USD briefly touched 1.28 yesterday as it fell on the back of a worse than expected UK July Flash PMI prints. Both the manufacturing and services surveys slipped further than expected with the manufacturing reading of 45 the lowest of 2023. The services survey showed 51.1 heading closer to the 50 level that divides expansion and contraction. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented in the report that "The UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries." He added, "Rising interest rates and the higher cost of living appear to be taking an increased toll on households." If the report is to be believed we could be nearing a point where the UK economy is finally beginning to crack on the back of the Bank of England's aggressive rate hiking cycle that has been enacted to reign in decades-high inflation. Despite this fairly gloomy read GBP/USD and GBP/EUR is relatively unchanged this morning, likely because markets are possibly expecting a dovish message from the US Federal Reserve at tomorrow night's policy decision and the eurozone PMIs were even worse than the UK's. GBP/USD trades at 1.2860 and GBP/EUR is around 1.16.
Key Movers
EUR/USD remains under 1.11 this morning after being forced lower yesterday by a slew of under par PMI readings from the eurozone with the German manufacturing PMI the one that really caught the market's attention. As it was confirmed to be 38.8 (the worst since May 2020) EUR/USD plunged eventually bottoming out around 1.1065, a drop of around 80 pips. Later in the day, we had the monthly PMI numbers from the US which were perceived to be a net-gain by investors. The services number came in at 52.4 however this poor figure was offset by manufacturing showing 49, still in contractionary territory but a lot higher than most had expected. Further afield China's elite pledged to support the economy as it continues to underperform since it emerged from its strict Covid lockdowns. These comments have buoyed the Australian and New Zealand dollar and were likely why we didn't see downward moves for them after the raft of poor PMIs from the Eurozone and the UK. Today's main event is the latest German IFO Business Climate survey due this morning. Investor's eyes will likely already be focused on tomorrow's interest rate decision from the US Federal Reserve so it could be a relatively quiet session ahead of this. EUR/USD sits at 1.1075.e
Expected Ranges
- GBP/USD: 1.2790 - 1.2925 ▼
- GBP/EUR: 1.1545 - 1.1660 ▲
- GBP/AUD: 1.8900 - 1.9070 ▲
- EUR/USD: 1.1015 - 1.1130 ▼