Sterling Fluctuating on Mixed Election News
Despite an unexpectedly strong construction PMI release on Friday (forecast 52.7, actual 56.0) any benefits for the Pound seemed negated by concern over the results of political polls and today’s worse-than-forecast services and composite PMI releases.
Today the Markit UK service sector PMI reported a fall from April’s 4-month high of 55.8, with the index hitting 53.8 in May. Companies accredited this decrease in growth to inflation and new businesses postponing big decisions until the general election has passed.
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply supported this notion, saying:
‘It was clear that slower new business growth let the side down, impacted by caution around the General Election, and a tightening of purse strings.’
Saturday evening’s terrorist attack in London also saw the Pound open slightly lower this week due to the halt in election campaigning and the rise in political tensions.
Euro Exchange Rates Weaker Despite Upbeat Eurozone Data
Friday saw the Pound to Euro exchange rate dropping to the lowest it’s been for two and a half months as polls pointed to a more uncertain election on the 8th of June.
Ipsos Mori’s penultimate election poll revealed only a 5 point gap between the Conservative’s Theresa May and Labour’s Jeremy Corbyn. Ipsos Mori claimed that this was in part due to May losing the support of women and middle-aged voters as a result of her controversial ‘U-turn’ on the dementia tax. These ratings may also have been affected by proposed false claims regarding campaign spending in 2015 by Conservative MP Craig Mackinlay.
There were some good data releases for the Eurozone this Monday morning, however, as the bloc’s May Markit composite PMI came in at 56.8, matching April and maintaining the highest figure since 2011. However, despite this evidence of continued strength in the Eurozone private sector, the Euro has recorded small losses against all major currencies so far today.
Disappointing US Jobs Stats Weigh on US Dollar
The big Friday news for the ‘Greenback’ was the release of US jobs data (non-farm payrolls) which came in far lower than expected. The number of new jobs created in May was 138k, disappointingly down from April’s 174K and a forecast of 182k. Wage growth was also somewhat poor, coming in at 2.5% as opposed to the market consensus of 2.6%. Despite this, analysts have claimed that these statistics wouldn’t prevent the US Federal Reserve from increasing interest rates later this month.
These negatives for USD balanced out and prevented any lasting losses for the GBP/USD pairing, and despite news of Donald Trump’s controversial withdrawal from the Paris climate change agreement, the GBP/USD trading operated within a fairly small band on Friday and continues to do so today.
Oil Price Uncertainty Inspires Canadian Dollar Movement
The Pound to Canadian Dollar exchange rate saw very insignificant fluctuations on Friday. However, the price of Canada’s largest export, crude oil, fluctuated by around 1% over concerns that Trump’s withdrawal from the Paris climate accord would result in more US drilling. The announcement that Saudi Arabia has cut ties with Qatar over their support of terrorist groups lifted the prices of crude oil, with Brent crude prices going up to $50.30 per barrel –a 0.7% increase.
Australian Dollar Could Fall on Domestic Growth News
The Pound dropped notably against the ‘Aussie’ on Friday due to traders buying into the Australian Dollar as a hedge against the uncertainty of the UK general election.
As of Monday the ‘Aussie’ itself is doing quite well across the board, holding gains achieved on Friday. Concerns about falling iron ore prices and a forecast drop in Wednesday’s GDP report could mean that the ‘Aussie’ is in for choppier times however.
Dairy Auction to Cause New Zealand Dollar Fluctuations
Election jitters dominated on Friday as the Pound dropped against the New Zealand Dollar.
The NZD Dairy Auction of Whole Milk Powder is expected soon. The price of New Zealand’s main commodity has recently been on an uptrend. Should this trend continue, and with UK on the cusp of the election, the GBP/NZD exchange rate could fall further still.
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