PMI data in the UK has achieved the triple this week – with Tuesday to Thursday morning seeing above forecast data first in manufacturing, then construction and finally this morning in services. The Pound has shot up in reaction pushing up to 1.62 against the Dollar as expectation grows that this means fourth quarter GDP may be revised upwards. The Euro has slipped as markets prepare for the European interest rate decision coming at 12.45 pm with rates widely expected to be held at 1 percent.
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Pound Sterling – UK Markets
Sterling has gained for a third consecutive day as the third daily piece of PMI data – this morning on services – has come in higher than the target following suite with the manufacturing and construction PMI data on Wednesday and Tuesday. This is lending some serious weight to the idea that the contracted fourth quarter GDP figure may be revised at a stronger level.
Once again, this has also lead to more questioning over when the much discussed interest rate rise might come in 2011, particularly alongside farther comments from monetary policy member Andrew Sentence and Deputy Governor about the need for rate hikes to combat rising inflation.
US Dollar – US Markets
The Dollar rebounded against majority currencies after two days of losses after yesterday’s ADP Employment data showed an increase in hiring by 187,000 jobs. The Dollar also rose as violence erupted in Egypt with reports of gunfire which is prompting risk-averse trading strategy. Against the Pound however, the Dollar has lost weight.
The upwards trend did register against most other major currencies however with this reduction is risk appetite taking the Dollar index up to 77.127.
Today’s jobless claims figures ahead of tomorrow’s payroll report are expected to show some improvement from last weeks disappointing figures with a decline to 420,000.
Euro – European Markets
The Euro has toppled against the Pound this morning as markets prepare for the interest rate decision from the European Central Bank with the wide expectation being for rates to be held at 1 percent.
There have also been some renewed fears about sovereign debt as Standard and Poor’s cut Ireland’s credit on uncertainty about how much more money lenders in the country might need.
As well as the interest rate decision itself, markets will be closely watching Trichet’s speech for any sign that indicated when a future change in policy might come. With inflation having climbed to 2.4 percent, well above the 2.4 percent target, speculation over rate rises is running rife. Should the rate’s be maintained at 1 percent as is expected, the prevailing disappointment could dampen the Euro.
Other Currencies – Highlights
Interest rates are the hotly featured topic in currency markets at the moment and the New Zealand Dollar has been falling over the past twenty fours as it was thought less likely that a rate rise will be likely following poor fourth quarter unemployment.
The unemployment figure rose to 6.8 percent from 6.4 percent which was above forecasts. The Finance Minister Bill English has also commented that there is a reduced need for raising rates, particularly with the strong currency being an impediment to exports.
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