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Your weekly summary of the key currency market events and what they mean…

Published: Friday 04 May 2018

  • Eurozone economic concerns continue
  • US Dollar enjoying support
  • Trade talks take the spotlight
While local politics in the UK didn’t have any bearing on the Pound’s performance, more disappointing economic data took its toll. The Service Sector Purchasing Managers’ Index (PMI) was expected to show some improvement, and although the sector is still showing some growth, it’s slowing down. There was the expected uptick following the weather-beaten March results, but while the sun has finally appeared, Sterling’s renaissance is still a way off yet, judging by the current climate.

And while the latest UK manufacturing results weren’t a runaway success, the sector is still in growth mode and there were definitely some silver linings to be found for this busy industry, such as lower inflationary pressures and increased orders from Europe, the US and Asia.

Meanwhile, the economy in the UK grew at the slowest pace for six years. Several successive data releases that disappointed markets mean it is unlikely that the Bank of England (BoE) will be in a position to increase interest rates again, as many had anticipated.

Eurozone economic concerns continue
This situation is mirrored in the Eurozone, where some moderate improvement has been shown in broader economic figures, but not as significant a move forward as was hoped for; and growth has slowed in a similar way.

US Dollar enjoying support
Economic data is a real mixed bag in the US, too, with, like the UK and Eurozone, a weaker service sector, but stronger factory orders and industrial results. The big news to boost the US Dollar was the employment results, which were very positive. Unemployment is down and jobs are up in the US, particularly in professional and business services, manufacturing, mining and healthcare. The Dollar has been doing well despite economic data recently, so markets are watching closely for any news that could cause the Dollar to drop.

Trade talks take the spotlight
One eye is firmly on the US-China trade talks and what will come from the negotiations – this could certainly create more ripple effects across currencies. However, the initial concerns of trade wars have mostly calmed down, boosting the US Dollar at the same time.
New Zealand Dollar dips
 The New Zealand fell despite positive employment figures, but concerns about wage growth slowing has dampened any ideas of raising interest rates, which has weakened the Kiwi currency.

Aussie Dollar also in the doldrums
The Australian Dollar has also had a hard week, following another interest rate hold by the Reserve Bank of Australia (RBA) – the 19th status quo decision for Australian intere4st rates in a row. No insights into whether rates will be raised at any point in the future came from the latest announcement, so markets are nervous about what this means for the Australian economy and, in turn, the Australian Dollar.
Canadian Dollar benefits from economic growth
 There was good economic news for Canada this week, though, boosting the Canadian currency.  Canadian Dollar had a good day yesterday after a healthy bounce in economic growth. In contrast to their friends across the Pond, Canada’s impressive annual Gross Domestic Product (GDP) growth of 3.0% was very welcome news, and the strong US Dollar also helped support the Canadian Dollar’s strength.
What to watch for next week…
Next week brings jobs data for the UK and more global PMIs, which could pack a punch when added to the data released this past week. We’ll also have some key Japanese data and policy announcements and important Australian data including Business Confidence, which could have an impact on currencies in Asia Pacific and potentially the commodity currencies. Lots of US data is expected, so the US Dollar could make its mark on its key currencies partners at the start of the week.

May Bank Holiday greetings!
Markets in several regions will be closed for the public holiday, so there could be some currency movement from Tuesday onwards, as other countries digest the various happenings while those in the UK were getting sunburnt (we can hope!) There will be a raft  of US data on the UK Bank Holiday, for example, so be prepared!
Have a great Bank Holiday weekend to all who get the chance to celebrate – and Happy Weekend to those who don’t get the extra day.

We’ll leave you with a few Bank Holiday themed funnies:

Monday, Monday
One seventh of your life is spent on Monday.  However, the only person to get his work done by Friday was Robinson Crusoe.

Transport fail
If a train station is where the train stops, and a bus station is where the bus stops, what is a work station?
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news