Market Info

Pound is down in early trade

05/10/2017 | OzForex

United States Dollar:

The dollar had little reaction yesterday after data showed the U.S. private sector added 135,000 jobs last month, as speculation the next Fed head could be less hawkish than expected continued to weigh. Fed Governor Jerome Powell and former governor Kevin Warsh were both interviewed at the White House last week to replace current Fed Chair Janet Yellen next February. While the two men are seen as serious candidates, Powell is considered as more dovish than Warsh, who has criticised the Fed's bond-buying programme in the past. Other economic data later in afternoon showed ISM Non-Manufacturing PMI jumping to 59.8%, the highest reading since August 2005. Later in the day Yellen spoke at a community banking conference in St. Louis, she refrained from making any remarks on monetary policy so markets were uneventful on the back of it. On today’s ticket we have unemployment claims and we hear from 2 FOMC members.

The pound found some welcomed support on Wednesday following the release of Services PMI. Financial data firm Markit said its services purchasing managers’ index rose to 53.6 in September, up from 53.2 in August. Economists had expected an unchanged reading. Whilst a marginal improvement was seen the report showed that new orders rose at the slowest rate in 13 months. “The three PMI surveys put the economy on course for another subdued 0.3% expansion in the third quarter, but the fourth quarter could see even slower growth," said Chris Williamson, chief business economist at survey compiler Markit. “The surveys therefore portray an economy struggling with the unwelcome combination of sluggish growth and rising prices, presenting a dilemma for policymakers.” GBP/USD was up 0.29% to 1.3269 following the release and GBP/EUR hit a high of 1.1287. Over the coming 2 days we hear from a number of MPC members and with the BOE’s November meeting nearing ever closer markets are still very unclear whether the recent data warrants a rise or not. This morning sterling is down across the board, on the opening bell GBP/EUR dropped to 1.1206 and cable falling below 1.32 hitting a low of 1.3197. With the move not data driven we can only presume the drop is politically driven. Theresa May delivered her speech at the conservative party’s annual conference, it was eventful to say the least, and she used her talk time to bring her divided party together and pitch herself as the only person able to deliver Brexit. Many believe she is not the right person to lead the country and seeing the Pound dip this morning markets appear to be worried.

We expect a range today in the GBP/USD 1.3090 to 1.3250

Euro:

The euro has taken a political hammering this week by worries over Catalonia, after a violence-marred independence referendum. But the common currency appeared largely unruffled by the regions leader saying late on Tuesday that Catalonia would declare independence in a matter of days - comments that weighed Spanish bond prices. Politically this is a nightmare but the currency markets haven’t been too fazed, the Euro has held its gains. The underlying assumption is that ultimately the constitutional court has ruled that the referendum is not legally binding, and that view will prevail. Economic data posted yesterday suggested most European economies continue to show signs of health, according the results from suveys of purchasing managers (PMIs) conducted by IHS/Markit. Growth in Germanys services sector accelerated to a six-month high in September. France saw a jump in the service PMI index. Activity in Spains service sector also accelerated, with the report indicating that new business was being generated at the fastest rate in two years. However, Italy saw service sector activity slow for the second month running. It’s another buys day of releases today and in particular we have the ECB Monetary Policy Meeting Accounts.

We expect a range today in the GBP/EUR rate of 1.1150 to 1.1250p>

Aussie and Kiwi Dollars:

Overnight we have seen the Aussie dip despite a better-than-expected trade surplus. The hammer blow came from a drop-in retail sales, posting its biggest fall in about four-and-a-half years. The steep decline was far worse than typical economist expectations of a 0.3 per cent rise and, in a double blow, the previous months flat figure was revised down to a 0.2 per cent slide. GBP/AUD was moving at 1.6840 prior to the release, this then broke above 1.69 hitting a high of 1.6921 overnight. Those gains have since been wiped with the UK market wakening and events as mentioned above.

The Kiwi had a light calendar overnight so moves were limited. Ranges were tight for GBP/NZD and the biggest move came this morning where we saw the price drop from 1.8508 to 1.8418. With nothing on the docket for the rest of the week we can expect moves to come from external factors.

We expect a range today in the GBP/AUD rate of 1.6810 to 1.6950p>

We expect a range today in the GBP/NZD rate of 1.8390 to 1.8490

Data Releases

AUD: AIG Construction Index

EUR: Retail PMI, ECB Monetary Policy Meeting Accounts

GBP: Housing Equity Withdrawal q/q, MPC Member McCafferty and Haldane Speaks

NZD: No data

USD: Unemployment Claims, Trade Balance, FOMC Member Powell and Harker Speaks

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