Sterling
Sterling sailed to a three-week and two-week high against the US dollar and euro respectively yesterday following the Purchasing Manager's Index for the UK Services sector showing the fastest rate of expansion for over a year. The UK currency found gains in all its major pairings as the report also noted new business to have increased at the quickest pace for over three years last month as better market conditions and fairer weather bolstered growth. Expectations are now intensifying that the Bank of England will keep their monetary policy strategy unchanged at their monthly meeting later today. Manufacturing, Construction and Service sector activity figures have all exceeded predictions this week, and in Mervyn King's last meeting before Mark Carney takes over the helm at the Bank of England economists are expecting the UK's asset purchase facility and interest rate level to stay constant as the economy has “all cylinders now firing” according to the Markit report. Keep on the pulse of the recent sterling surge throughout an important day today with Smart.
The euro was characteristically volatile during trading yesterday, responding to mixed economic reports emanating from the Eurozone. Not much overall change was seen against the US dollar, whilst the single currency weakened against a resurgent sterling as European service sector figures fell short of expectations and retail sales fell by 0.5%. Italian services data was weaker than expected and whilst Spanish service sector performance was slightly better both continued to contract amidst a deepening recessive climate. Meanwhile Latvia was given the green light to adopt the single currency despite concerns about its long term economic credentials. Looking forward to an important day the European Central Bank holds its monthly press conference this afternoon with the expectation being for the ECB to hold interest rates at the record low of 0.5%. Focus will be on the decision and press conference around lunchtime; monitor progress with your trader as events transpire.
The US dollar had a varied day as markets reacted to the latest batch of data from the United States - whose service sector, according to the Purchase Manager's Index, expanded slightly above expectations in May though growth in factory order figures were disappointing and the US private sector added fewer jobs than hoped last month. The disappointing report from payroll processor ADP especially has fuelled uncertainty over the fate of quantitative easing as employment will be a key catalyst if the Federal Reserve's asset purchase programme is to be scaled back. The US currency stayed range bound against the euro and weakened in the face of strong sterling performance, though unemployment data released today and tomorrow will be crucial having been highlighted as a key influence over monetary policy going forward. The subdued pace of hiring however may indicate that employment may not be keeping pace with the rest of the recovery and experts remain split as to how soon monetary policy could be tightened. Call in for the latest developments.
Elsewhere, the Australian dollar struggled again yesterday as weak national account figures came in below expectations; sparking speculation over further interest rate cuts from already record lows. Some economists are even predicting two cuts in borrowing prices before the end of the year which would tap more value out of the currency. Interest rate cuts again were the catalyst for the Polish zloty losing ground as eastern Europe's largest economy battles with its worst slowdown in four years and borrowing costs at record lows. The Japanese yen strengthened yesterday however, moving back below the one hundred mark against the US dollar as stock prices in the region fell after the Prime Minister's speech underwhelmed the market by providing little extra detail on his quantitative easing strategy. Today we have the Governor of the Bank of Canada's speech after PMI figures are released; after the Canadian dollar dropped to the lowest levels this year yesterday the central bank is coming under increasing pressure to take action. Call your trader today for the latest news and rates for your currency trades.
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