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// GBP

Thursday 2nd March 2017

The UK PMI manufacturing index was lower than expected with a decline to 54.6 for February.

The UK PMI manufacturing index was lower than expected with a decline to 54.6 for February from a revised 55.7 the previous month. The index remained above the long-term average and overall confidence remained firm with further gains in employment while inflation pressures remained strong.

The net consumer lending, money supply and mortgage approvals releases were all stronger than expected, but Sterling came under renewed selling after the PMI data with a retreat to below 1.2350. Wider US strength subsequently pushed the pair to 6-week lows below the 1.2300 level while the Euro strengthened to 0.8580. The government lost an Article 50 Amendment vote in the House of Lords over guaranteeing the rights of EU citizens in the UK. Although there will be expectations that the vote will be over-ruled in the House of Commons, there was some negative impact on Sterling sentiment and the UK currency remained firmly on the defensive on Thursday.

// EUR

Thursday 2nd March 2017

Dollar gains dominated the European morning on Wednesday after Fed Dudley’s hawkish comments overnight.

Dollar gains dominated the European morning on Wednesday after Fed Dudley’s hawkish comments overnight and the Euro dipped to below 1.0550 against the US currency, although rising German yields eased net selling pressure to some extent. German consumer process rose 0.6% in February with the annual inflation rate rising to 2.2% from 1.9% previously and this was the highest rate for over four years. With German unemployment continuing to decline, there will be expectations of higher wage settlements which could also unsettle the Bundesbank and increase pressure for a tighter monetary policy.

// USD

Thursday 2nd March 2017

US PCE prices rose 0.4% for January with an annual rate at 1.9% from 1.6% and close to the Fed’s 2% target.

US PCE prices rose 0.4% for January with an annual rate at 1.9% from 1.6% and close to the Fed’s 2% target, although the core increase was held to 1.7% and unchanged from the previous month. The ISM manufacturing index rose to 57.7 for February from 56.0 in January and this was the highest reading for over two years which maintained confidence in the outlook. The dollar was still subjected to some profit taking and the Euro rallied back above the 1.0550 level.

Fed Governor Brainard stated that the US economy appeared to be in a transition phase to a more stable growth path and that gradual interest rate increases are likely to be appropriate soon. There were also comments that a shrinking of the balance sheet could start before too long. Given that Brainard has consistently been one of the most dovish FOMC members and resisted calls for higher rates, the commentary maintained increased expectations of a March rate increase which continued to support the dollar. The trade-weighted index hit a seven-week high and the Euro was below 1.0550 on Thursday.

// Rates

Thursday 2nd March 2017

Morning Market Rates: (Please note: These are indication prices only, they are not offer rates)

GBP/USD: 1.2292

GBP/EUR: 1.1656

GBP/AUD: 1.6071

GBP/CHF: 1.2413

GBP/ZAR: 15.9996

GBP/JPY: 140.4300

USD/ZAR: 13.0249

EUR/USD: 1.0543

EUR/ZAR: 13.7440

GBP/NZD: 1.7277

GBP/CAD: 1.6417

GBP/AED: 4.5096

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