- Sterling in the crosshairs during UK local election day
- US-China trade negotiations will be under scrutiny
- Trade deals more likely to move markets than US central bank
By Jonathan Russel
Foreign exchange markets have had their eyes firmly trained on the release of the Service Sector Purchasing Managers’ Index (PMI) data at 09:30am for guidance on whether or not the British Pound's recent sell-off should be extended. The results were subdued, with a slow pace of services business activity and employment through April 2018, and a small upturn following the snow-hit March figures. Expectations for the Bank of England (BoE) to raise interest rates in May had boosted the Pound for much of 2018, until underwhelming economic data suggested to markets that this was too optimistic.
Sterling in the crosshairs during UK local election day
The Pound will be under pressure all day today as voters head to the polls for council elections across England.
Elections are being held in 150 local authorities, spanning city and district councils, and the London Boroughs. A weak showing for the Conservatives will put more pressure on the incumbent government and will be another reason for traders to lose conviction and sell the Pound.
US-China trade negotiations will be under scrutiny
US Treasury Secretary Steven Mnuchin arrives in Beijing today and is set to kick start trade negotiations with China. Ahead of the meeting, the official China Daily said in an editorial that it will “stand up to the US’ bullying as necessary”. And “as a champion of globalisation, free trade and multilateralism, it will have strong support from the international community”. The dollar has strengthened recently as investors believe that the risk of an all-out trade war have receded however these negotiations will be closely watched.
Trade deals more likely to move markets than US central bank
Asian stock markets were mixed again on Thursday. Investors digested an as-expected monetary policy decision from the US Federal Reserve and looked to US-China trade talks with what hope they could muster. The US central bank left interest rates alone as had been all-but universally expected. However, it pointed to gradually rising inflation in a statement judged to have left the door wide open to a hike next month. Trade was also in focus thanks to the start of those high-level discussions Thursday in Beijing.
What next for the currency markets?
Still to come on Thursday’s economic data agenda are Eurozone consumer price numbers, the US service sector snapshot from the Institute for Supply Management and US trade data. Initial Jobless Claims figures are also due, as are Durable Goods and Factory Orders.