Currency Note

Pound enters GDP week on mixed footing

By Sharyh Murray-Francis April 3rd, 2023

Pound makes weekly gains against US dollar.

Sterling enters the week down on the euro compared to last Monday but with fresh gains of around 0.68% against the US dollar within the same time span.

The S&P is scheduled to release one of the UK’s leading indicators of UK’s economic health, with the latest purchasing managers index (PMI) data at 9:30 today. PMI is generally an important release for market participants, as it provides the most up to date and relevant insight into how companies view the economy.

Today’s release is a final release for manufacturing PMI. Pound-watchers will be keen to see if the results trigger any volatility.

The Organization of the Petroleum Exporting Countries (OPEC+) announced a surprise cut to its oil production on Monday, boosting fears that central banks will need to hike interest rates further to combat inflationary pressures.

As a result, European equity markets were headed for a lower open.

Also this morning, the Japanese yen weakened against the US dollar, falling to its lowest levels in two weeks. This too followed the news of surprise production cuts from OPEC+ as it increased fears that the US Federal Reserve may need to continue raising interest rates to tame inflation.

Tokyo stocks climbed during Asian trading hours – the Nikkei 225 index gained around 0.58% .

On the data front, US economic data will dominate markets this week. There will be plenty releases for investors to digest, with a flurry of key data scheduled to hit markets on Wednesday.

Today at 3pm UK time the ISM manufacturing PMI will be released. The index edged higher to 47.7 in February and is expected to rise to 49 today. If it does, this is likely to please markets.

However, it is also worth noting that an index above 50.0 points to industry expansion, whereas anything below indicates contraction.

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GBP: BoE chief economist to deliver speech

On Tuesday, the Bank of England’s chief economist, Huw Pill, will deliver a speech at the International Center for Monetary and Banking Studies, in Geneva.

Economists will be listening closely to Pill’s speech which is titled, “Inflation, Persistence, and Monetary Policy” – Any hawkish comments could boost sterling.

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EUR: Investors prepare for plenty PMI

Over the course of Wednesday, eurozone markets will see the release of PMI data from several countries.

Spain, Italy, France and Germany will all be released as well as Eurozone PMI. The Euro Area final services PMI is forecast to rise to 55.6 following a reading of 52.7 in the previous month.

USD: Nonfarms this Friday

The UK will see a lack of data on Friday due to the upcoming bank holiday however, there will be lots of economic releases from the US. Nonfarms data, a vital release for markets, will be one.

The previous data showed that the US economy unexpectedly created 311,000 jobs in February this year and economists predict that this number will fall to 250,000 on Friday.

Many will be watching the latest nonfarms closely as anything in line with, or greater than market expectations may help to boost the US dollar.

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