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Pound knocked down by disappointing data and North American growth

Published: Friday 06 April 2018

  • Eurozone sees sub-par sector results
  • Good and bad news Down Under
  • US economic news by the bucket load this week
The Pound’s recent fall comes in spite of positive manufacturing news for the UK, with a reported “export boom” in a recent report on manufacturing investment and solid growth reported British manufacturing in the latest Purchasing Managers’ Index (PMI). The shock slide in the UK service sector results proved too much for the Pound, and combined with a lacklustre Construction PMI – both sectors heavily affected by the unseasonal weather conditions throughout March – chipped away at Sterling strength. Markets remain hopeful that the March figures will prove somewhat of an anomaly, following in the wake of the Beast from the East.

Eurozone also sees sub-par sector results
The Eurozone also saw slowing growth across a number of key sectors, with notable disappointments in German and French industry, what now appear overly-optimistic forecasts for growth. GBP-EUR remains much the same as little data is released for either the UK or Europe at the end of a shorter trading week for this currency pair. All eyes now turn to today's North American data.

Euros, Halo Financial website

Good and bad news Down Under
Australia also had a mixed bag of economic results. While building approvals where down, retail sales exceeded forecasts by double the number, and manufacturing sector results came out strong and Australia’s central bank, the Reserve Bank of Australia (RBA) chose to leave interest rates unchanged. However, the service sector sentiment report from China was gloomy and, given Australia’s very close trading relationship with China, this stopped the Australian Dollar from strengthening on the good news.

US economic news by the bucket load this week
A host of economic data and political announcements out from the United States on Wednesday this week produced mixed results and largely cancelled themselves out in the currency markets. ADP employment data, two speeches by Federal Reserve members, the ISM Non-Manufacturing Composite Index, Purchasing Managers Indices (PMI) in the service sector, Durable Goods Orders, Factory Orders and an oil inventories measure were all released this week. These were followed by the US Trade Deficit figures for February; and the all-important jobs data today, which, after eager expectations boosted the US Dollar, ultimately disappointed.

What had the greatest effect on the US Dollar earlier this week was an announcement by economic adviser Larry Kudlow that the United States was in “negotiation” with China rather than a trade war. The Kudlow announcements saw the US Dollar bounce back, after falling earlier in the week as China’s State Council said it would place tariffs on 106 types of goods from the United States in retaliation for the Trump administration’s $50 billion penalties on Chinese goods.

The announcement from US president Trump that he plans to add over $100 billion in trade tariffs for China has knocked the markets for six, and the disappointing employment numbers for the US, at around 82,000 fewer jobs than were forecast, has weakened the US Dollar.

The over-reaching concern of the markets is about escalating tit-for-tat trade tariff action, which is likely to keep the US Dollar volatile for the immediate and short term.

US Dollars on the Halo Financial website

Canadian Dollar strengthens on positive data
Canadian employment data was released today and remains the lowest post-economic crisis, at 5.8 percent. Jobs growth increased quicker than forecast as the Canadian economy saw 32,300 new jobs in the past month.
The number of Canadians in full time employment is still increasing and has risen by 78,000 in the first quarter of 2018. This has helped boost the Canadian Dollar against its major currency partners, including the Pound, which is in stark contrast to the recent GBP-CAD rate.

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What do you call a bear in the rain? A drizzly bear.
What do you call a bear with no teeth?  gummy bear.

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