June PMIs in Focus, GBP and EU Movement Expected

Pound Sterling (GBP)

The Pound put on a stronger performance towards the end of last week, due to increased speculation that the Bank of England (BoE) could tighten UK monetary policy in the not-too-distant future.

Sterling saw mixed movement throughout the second quarter or 2017 and was hampered by UK election news as well as general economic concerns.

Last week saw the publication of Britain’s final Q1 growth stats, which confirmed Britain had grown 0.2% quarter-on-quarter and 2% year-on-year in the first quarter of 2017 as expected. This week, investors are anticipating Britain’s June services PMI from Markit.

Sterling came under a little pressure on Monday as the manufacturing PMI dropped from 56.3 to 54.3.

US Dollar (USD)

Last week’s gains rounded off a strong quarter for GBP/USD, with the pair having strengthened 3.2% throughout the quarter overall. The pair currently trends near its best levels since May.

GBP/USD strength has been largely due to an increase in Bank of England (BoE) tightening bets, as well as concerns that US President Donald Trump will be unable to push his growth-focused economic plans through Congress.

Last week’s mixed data did little to alter Federal Reserve interest rate hike bets. The core PCE print of US inflation slipped from 1.5% to 1.4%, but on the other hand the Chicago PMI jumped to 65.7 and Michigan’s June consumer confidence survey only slipped to 95.1 rather than to 94.5. Michigan inflation expectations remained at 2.6%.

Euro (EUR)

The Pound to Euro exchange rate ended last week slightly higher as investors settled positions at the end of the second quarter.

The Euro has been supported over the last week by increased hopes that the European Central Bank (ECB) is considering tightening its aggressive quantitative easing (QE) program. ECB tightening bets improved slightly towards the end of the week as Eurozone inflation slipped from 1.4% to 1.3% in June year-on-year, rather than the previously estimated 1.2%.

If ECB officials begin to take a more hawkish tone, the Euro could climb in the weeks ahead.

Monday saw the publication of the Eurozone’s final June manufacturing PMI, which beat expectations of 57.3 and came in at 57.4.

Australian Dollar (AUD)

The Pound to Australian Dollar exchange rate ended last week over a cent above its opening levels.

GBP/AUD held its ground on Monday despite an improvement in AiG’s Australian manufacturing index in June. The index improved from 54.8 to 55.

However, Australia’s building permits report from May was much worse than expected. It was projected to contract by -2% but instead plunged from 4.8% to -5.6%.

New Zealand Dollar (NZD)

The Pound to New Zealand Dollar exchange rate put in a solid advance last week as the New Zealand Dollar was sold from recent highs on profit-taking while the Pound benefitted from the week’s Bank of England (BoE) bets. On Monday morning, GBP/NZD continued to edge higher but has so far been unable to hold last week’s highs.

Canadian Dollar (CAD)

The Pound to Canadian Dollar exchange rate traded in a narrow range last week as both currencies were strengthened by domestic factors.

Solid Canadian growth stats have supported a recent increase in Bank of Canada (BOC) interest rate hike hopes, with some investors betting on a rate hike taking place this month. Investors began betting the BOC would hike rates after Governor Stephen Poloz claimed that rate cuts had done their job.

Year-on-year growth in Canada improved from 3.2% to 3.3% in April following a monthly expansion of 0.2%.

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