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Change of heart for May?

GBP - British Pound

Tuesday was a mixed day for sterling as it remained in the red at close of play of the European session as it moved closer to the psychological supports of 1.30 against the US Dollar. Coupled with weaker than expected UK construction PMI data (49.7 vs a forecast of 49.8) left sterling under further downward pressure, particularly as the data remained under the 50 threshold for the second straight month.
However despite another negative start to the weak for sterling, it’s resilience against large negative market movements is remarkable. With such a flurry of negative data/news coming from the UK, many expected sterling to be in a far worse position than current.
However sterling rose sharply just after the close of the European session after PM May outlined her alternative approach to Brexit. May plans to further delay Brexit and enter discussions with the labour party in order to find a workable solution that may win a majority in Commons. This is expected to be far more aligned with the Labour Party’s alternative Customs Union proposal. It will be interesting to see how UK services PMI comes in at 9.30 however this data is not expected to weaken sterling to a great extent, no matter the figure.

Key Movers

The euro has once again dropped against the U.S. dollar as investors analyse the economic growth prospects within the two areas. The euro is now at 3 week lows against the U.S. Dollar with further weakness expected when service PMI’s are out later today.
Survey data on Monday showed factories in the euro zone had their worst month in almost six years in March and based on current evidence, there is no certainty that these will improve.
It looks as though more poor data is expected to come out of the Eurozone in the coming months, however a large part of this may have already been priced into the currency.
The U.S. Dollar has been fairly dormant since the start of the week however this is expected to change as the week continues with key economic data scheduled to be released from the US on Friday. Employment and wage data has been a big market mover in the past, especially in the midst of a potential global economic slowdown. Whitehouse economic adviser Larry Kudlow said the two countries expect to make headway at this week’s talks, which start later today. There are also rumours from the chamber of commerce that the US-China trade deal is 90% completed and therefore we may see extreme dollar strength by the end of next week.
Still to come on Wednesday are various PMI data from around Europe and the US, with official Crude Oil inventory levels from the Department of Energy also due.

Expected Ranges

GBP/USD: 1.3130-1.3250 ▲

GBP/EUR: 1.1700-1.1810 ▲

GBP/AUD: 1.8565-1.8580 ▲

GBP/CAD: 1.7485-1.7600 ▲