Pound consolidating as data improves
Purchasing Managers Survey shows continued improvement
There has been a genuine change in activity following the agreement of the Brexit transition and finance directors and CFO’s, who may not be particularly impressed by the content of the agreement, are relieved that at least now they have something “official” to work with.
In keeping with recent times, an air of optimism rises when Brexit is out of the headlines and traders can concentrate on economic developments and the outlook for monetary policy. Yesterday’s data was another building block in the case for a rate hike next month as the MPC continues towards the normalization of interest rates.
The pound finds itself hemmed in between the 1.4020 and 1.4100 levels. Buyers believe the recent rally from the low of 1.3711 on March 1st has further potential while sell orders from traders who were caught by the speed of the decline from 1.4245 last week, have set their sell orders at or a little above the current level of 1.4080.
Dollar index holding onto gains
There is a degree of realism surrounding the headline number for March with analysts expecting the notoriously difficult predict number to come in at around +200k.
Following a day when there were no new concerns over a trade war, despite the threat remaining in the background, the dollar managed to consolidate its recent improvement. Traders remain wary of the U.S. administrations veiled desire for the dollar to trade a little lower despite the “official” feelings of the President and his Chief Economic Advisor.
As the Fed continues to move towards its own normalization of interest rates, the pace rather that the direction of changes to monetary policy becomes a prime driver for the currency. There is still a degree of expectation from traders, who still see four hikes in 2018, despite the dovish recent comments of the Fed Chairman, driven by growth in employment and wage inflation.
Euro lacking impetus
This has led to the euro suffering although all that has happened is that it has fallen to the lower end of its well-known range. Yesterday it traded in a 1.2345/1.2253 range although there appears to be little interest in testing support at 1.2240.
This week sees the release of several pieces of data, including inflation; which is expected to remain benign with the core YoY rising marginally to 1.1%, unemployment; which is expected to fall to 8.5% from 8.6%, retail sales; likely to have improved considerably from the previous very poor data and purchasing managers indexes; which should continue to show unspectacular yet positive activity.
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”