The Pound has begun Thursday posting gains against the US Dollar (GBP/USD) and Turkish Lira (GBP/TRY), but falling against the Euro (GBP/EUR). Brexit developments are slightly fraught and Theresa May’s leadership in question. On Wednesday, her inner cabinet rejected her proposal for a European Union customs deal for Britain post-Brexit. The cabinet was split six against five, and newly appointed Home Secretary Sajid Javid voted against the Prime Minister’s proposal, tipping the scale of votes on just his third day in the position.
In terms of economic data, markets will be looking to today’s Markit UK Services Purchasing Managers’ Index (PMI) and Composite PMI due out at 9:30. Slightly later at 10:00, the Eurozone Consumer Price Index (CPI) will be released which could contribute to some significant Pound to Euro (GBP/EUR) exchange rate movement. Later int he day, the US ISM Non-Manufacturing Services Composite index will be released.
Current Interbank levels:
GBP/EUR – 1.1345
GBP/USD – 1.3619
GBP/TRY – 5.7279
Above update provided 08:58 3/05/18
The Pound exchange rate was granted some respite on Wednesday against other currency majors such as the US Dollar (GBP/USD), Euro (GBP/EUR), and Turkish Lira (GBP/TRY) after UK construction data printed positively.
The Pound has taken a beating in the past week after investors priced out the possibility of a Bank of England (BoE) interest rate hike in May following weak growth numbers and other disappointing data. March construction activity was disrupted on account of the Beast from the East which caused adverse weather conditions. Markit’s March Construction Purchasing Managers’ Index (PMI) slipped below the 50.0 level that separates expansion from contraction, down to 47.0. However, forecasts had suggested the April figure would recover to a more positive 50.5. This morning’s April figure showed a jump above forecasts to 52.5, which allowed the Pound to climb.
— Markit Economics (@MarkitEconomics) 2 May 2018
The Pound has advanced by around 1.57% against the Turkish Lira (GBP/TRY) after Turkey’s Istanbul Chamber of Industry Manufacturing PMI came in at 48.9 in April, down from the previous month’s 51.8. Thursday will reveal the latest Turkish Inflation Rate and Producer Price Index (PPI) for April which could create some Turkish Lira exchange rate movement.
Meanwhile, helping the Pound climb against the Euro was the latest Eurozone Gross Domestic Product (GDP) reading which slipped from 2.7% to 2.5% in the first quarter of the year. The first quarter growth number came in at 0.4% on the quarter, a downwards adjustment from the previous 0.6% reading, but although growth momentumin the Eurozone has slowed, it’s worth noting that it’s still much more productive than the UK’s 0.1% in the same time period.
Industry expert Moritz Degler commented:
‘The moderation in recent months was worsened by cold weather, a historically severe flu season in Germany, extensive strikes in France and other temporary factors. Moving into Q2, some of these should be reversed.’
Stateside, all eyes will be on the Federal Open Market Committe (FOMC) which is due to make its latest interest rate decision today. It’s expected that interest rates will remain on hold at this meeting, but there’s always the possibility of a central bank surprise. Tuesday saw the US ISM Manufacturing figure fall below forecasts, from 59.3 to 57.3. The ISM employment figure which can be seen as a contributing factor as to how the Non-Farm Payrolls stat might print also came in lower at 54.2 down from 57.3. The US Change in Non-Farm Payrolls stat will be out on Friday and could create dramatic US Dollar exchange rate movement.
The Pound to Turkish Lira (GBP/TRY) exchange rate is residing at around 5.6643 (approximately 1.57% higher). The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.3660 (around 0.36% higher). The Pound to Euro (GBP/EUR) exchange rate is trading at levels of 1.1277 (around 0.27% higher).