Good construction data helps sterling hold steady | Smart Daily Currency Note

Sterling

Sterling traded within a narrow range yesterday during a relatively quiet period for the global foreign exchange market. The UK currency performed strongly against an under pressure Australian dollar and held steady against the euro and US dollar after trading at a three-week high against its American counterpart on Monday. Sterling was supported by the UK construction purchasing manager's index registering an expansion for the first time in 2013; growing beyond predictions to the highest level for eight months after having been expected to reveal a seventh straight month of contraction. Today sees the release of Purchasing Manager's Index data from the services sector, which accounts for around 75% of the UK economy, where further positive news would mean growth across all three sectors. With Mervyn King's final policy meeting as Bank of England Governor tomorrow and crucial Service sector figures emerging today, call Smart now to stay on top of market reaction and for the latest live rates.

Euro

The euro posted modest gains on Tuesday despite the Producer Price Index contracting by 0.2%; the first reduction for over three years. Nonetheless, recent rebounds in euro value are likely to be short lived coming up to the European Central Bank's interest rate decision and the pervading gloom surrounding Europe's economic prospects. Indeed, Cyprus' credit rating sunk deeper into junk territory as ratings agency Fitch downgraded the country to a B-minus – warning it could experience a deeper recession than expected. Speculation is rife as to whether the ECB President will start to exhibit an enhanced willingness to drop interest rates to new record lows and so traders will remain cautious ahead of tomorrow’s central bank meeting. Call in to see how PMI data and retail sales figures impact euro value throughout today.

US dollar

The US dollar largely recovered from weak manufacturing data released yesterday on the back of more speculation of an early unwind of quantitative easing. Figures yesterday afternoon showed the world's largest economy's trade deficit to have widened beyond expectations through April; up 8.5% to over 40 billion dollars. Many have taken the rebound in imports of consumer goods and business equipment especially to indicate strong domestic demand and accelerating growth in the economy - with the data pointing to gains in both household and business spending, whilst exports from a burgeoning American automotive industry are on the up. The job market report on nonfarm payrolls at the end of the week will be under significant scrutiny: it is expected to remain steady, though with the central bank's Chairman highlighting unemployment as a key influence on monetary policy, a swing in either direction away from expectations will impact price levels. Talk to your trader now through what will be a busy afternoon for US data.

Worldwide

Elsewhere, the Canadian dollar tapered off its strong performance from the start of the week as trade balance figures came out worse than forecast yesterday afternoon. The ailing export data was largely resultant from crude oil - Canada's biggest export, falling in value by a percent recently. The Canadian dollar's week will continue to be of interest, with building permit data being released tomorrow as well as Purchase Manager's Index and employment statistics later in the week. Down across the Pacific, the Australian dollar maintained its decline from Monday night into Tuesday as the Reserve Bank of Australia left its key interest rate steady at a record low amongst strong suspicion that monetary policy will be eased to protect the economy from an impending ceiling on mining investments. The Polish zloty had a strong day yesterday however, recording its biggest gains against the US dollar since December and jumping a percent in response to pro-stimulus data coming out of the US. Today, on top of the Canadian building permit data, we have Australian quarterly growth figures: call us on 0207 898 0500 for up to the minute rates with Smart.