The story gets even worse for Sterling this week, with the most recent hit being PMI Manufacturing data which fell far short of targets this morning. This has further weakened Sterling as the PMI data has been treated as one of the first key indicators of the UK’s performance into the second quarter. Sterling finds itself in a serious position therefore as the PMI Construction and PMI services Data comes out next week. With manufacturing usually the strongest of the three, this is a worrying sign that second quarter growth may not have revived as hoped from the first quarter’s lapses. We have numerous strategies to protect our clients from currency volatility so get in touch with your broker if you have an upcoming transfer involving Sterling.
Pound Sterling – UK Markets
The Pound tumbled against the Euro as well as the Dollar throughout the second half of yesterday afternoon. Poor services data knocked Sterling, with very poor forecast PMI manufacturing adding to the woes this morning.
PMI Manufacturing was forecast to come in at 60.9 but in fact the reading only came in at 57.1. This is far under target, considering that the same data from Europe this morning was only 0.2 percent below the official forecast for the European version of the news. The data was particularly important because this morning’s PMI index was the first insight into how the UK economy is performing into the second quarter – and whether it will shake off some of the dire figures that were seen in the first quarter.
PMI Services and PMI construction data will complete the picture next week. Should these also fall short, it could mean very bad news for the Pound.
US Dollar – US Markets
The Dollar has been damaged by further poor data for the second consecutive day on the US jobs market. US initial jobless claims figures came in worse than expected yesterday at a level of 388,000 for March.
Non-farm payrolls later this afternoon will therefore be a crucial end to the week for the Dollar as this employment data is typically treated as one of the most key and reliable indicators of the US job market.
Higher than expected European inflation yesterday added more downwards pressure to the Dollar as forces mount up for a European interest rate rise.
Euro – European Markets
The Euro gained on the Dollar throughout yesterday, losing only a little of this ground so far into Friday. The Euro is also at a five month high on Sterling with the main momentum for this rise coming from yesterday’s higher rate of European inflation that moved up from 2.4 percent to 2.6 percent.
The higher inflationary figure will no doubt help shape the decision on interest rates at the next ECB meeting. Most economists are now expecting that rates will rise from 1 percent to 1.25 percent.
The Euro has managed to shake off negative news from Ireland yesterday where the stress tests on banks revealed that an extra 24 billion Euros is needed in financial restructuring which will mean that the Government are in majority control of all remaining lenders.
Other Currencies – Highlights
With the well documented announcement over recent weeks that the first commercial space-line will be offering flights into space, you won’t be surprised to hear that discussions have already begun on what form of currency will be utilized outside of any formal currency zone. Whilst speculation was rife that the US Dollar would be the initial formal currency, Currency Solutions have been informed that a new Moonie (MON) currency has been negotiated. Moonies will be regulated by the Federal Reserve. The currency is set to launch in 2012 and will open at a rate of 0.8134 against Sterling…if you would like to forward-book a moonie with your broker, feel free to call in.
Dollar Weakens as Fed Rate Cut in July Seems Imminent