Daily Currency Update
The pound got an unexpected boost yesterday as Septembers Final Services PMI was revised up to 49.3 from the initial Flash reading of 47.2. Although still below 50 which divides contraction and expansion the better-than-expected news was enough to send GBP/USD back up through 1.21 after trading as low as 1.2036 in the early hours. Despite a gloomy outlook for the UK economy, it may not be quite as bad as many fears, at least for now. Dr John Glen, Chief Economist at the Chartered Institute of Procurement and Supply (CIPS) comments in the report stated: "The UK economy is still showing signs of strain and the impact of interest rate rises are having an effect. Consumers are concerned by the higher cost of living and expenses continuing to rise especially fuel costs and are reigning in spend accordingly.” The pound rallied even further later in the day as the monthly ADP Non-Farm Employment Change from the US missed target however it ran out of steam before it could test 1.22 eventually topping out around 1.2175. This morning we have the monthly Construction PMI reading from the UK with 50 expected. GBP/USD opens this morning around 1.2130 with GBP/EUR continuing to tread water around the low 1.15s.
Key Movers
As mentioned before the latest ADP employment data from the US fell short of estimates with it showing an extra 89k positions being filled in September compared to expectations of 154k. Later in the day we had the ISM Services PMI survey for September which came in on target at 53.6. The difference between this and the UK Service PMI's 49.3 highlights how the US economy is outperforming the UK and reinforces market belief it will be the Bank of England who will eventually be forced to cut rates ahead of the US Federal Reserve. There was little news from the Eurozone other than a pre-recorded speech from European Central Bank head, Christine Lagarde which was shown at the start of the ECB's Conference on Monetary Policy on Frankfurt. The remarks that interest rates would need to be kept in restrictive territory to combat inflation sent EUR/USD higher with it managing to regain the 1.05 level. This afternoon's US Unemployment Claims data from the US is expected to print 211k for last week however market attention is likely already focused on tomorrow’s monthly jobs report from the US. EUR/USD trades around 1.0510 at present.
Expected Ranges
- GBP/USD: 1.2030 - 1.2180 ▲
- GBP/EUR: 1.1465 - 1.1610 ▲
- GBP/AUD: 1.9030 - 1.9190 ▼
- EUR/USD: 1.0450 - 1.0570 ▲