United States Dollar: GBP/USD fell below 1.53 again on Wednesday morning following the release of weaker than expected UK Services PMI. In fact, the data showed that the UK’s service sector suffered its sharpest decline in close to four years as the index fell to 56.5 in May vs. expectations for 59.2. The effects of the UK election result now seem to have worn off and investors now have no hesitation to sell the pound on the back of any weak data. That said, with talks coming to a head over Greece and the plethora of high impact economic data released yesterday and still due before the end of the week, it’s surprising this got as much of a reaction as it did. Cable fell to a low of 1.5260 but as the day wore on and various events unfolded - namely the ECB monetary policy press conference and rhetoric on Greece – the pair pushed gradually higher, in line with the rally in EUR/USD. Later in the day, US ADP Non-Farm Employment data was released and printed in line with expectations. ISM Non-Manufacturing PMI was also released, missing expectations and giving GBP/USD a further boost – the pair opens this morning at 1.5320.
We expect a range today in the GBP/USD rate of 1.5245 to 1.5450
Euro: It was a wildish day for the euro yesterday. As expected the ECB left monetary policy unchanged and so it was Mario Darghi’s presser that everyone was waiting for. The ECB President raised inflation expectations for the Eurozone and said that markets should get used to volatility in the bond market, these comments re: inflation coming shortly after positive inflation data released earlier in the week. German government bonds snapped lower on his words, dropping to their lowest level in seven months. EUR/USD naturally rallied, siphoning through 1.12 to a high of 1.1285. Meanwhile, a Greek deal still looks as though it will be struck…..at some point before the end of the week, but there’s still no news on a firm agreement between Athens and its creditors. Negotiations and associated rhetoric will continue over the next couple of days. The euro is stronger across the board and GBP/EUR has fallen back to 1.3620.
We expect a range today in the GBP/EUR rate of 1.3580 to 1.3660
Aussie and Kiwi Dollars: After pushing higher through most of the early part of the week following the RBA announcement and stronger GDP data, the aussie dollar was knocked back lower overnight after the release of weaker than expected Retail Sales and Trade Balance; Retail Sales were flat in April at 0.0% vs. expectations for 0.4%. AUD/USD gapped from .7775 to .7710 on the news and it remains on the back foot this morning at .7715. NZD/USD has also fallen, tracking the aussie dollar lower and it trades at 0.7125 in London.
We expect a range today in the GBP/AUD rate of 1.9770 to 1.9990
We expect a range today in the GBP/NZD rate of 2.1400 to 2.1650
AUD: AIG Construction Index
EUR: Retail PMI
GBP: Official Bank Rate
NZD: No data
USD: Challenger Job Cuts y/y, Unemployment Claims, Revised Nonfarm Productivity q/q, Revised Unit Labour Costs q/q
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