This week sees a lack of notable UK data, and while that may mean that the Pound will be trading in a fairly narrow range, global developments could help Sterling push above current resistance levels against its major rivals.
On Monday markets were closed for US and UK national holidays, and movement was stilted as a result.
On Tuesday the Pound was holding steady following the release of two fairly low key domestic reports.
Firstly, figures compiled by the Confederation of British Industry showed that confidence among services companies in the UK advanced to record levels, with the index surging from 43 to 53.
The result prompted this response from CBI Deputy Director General Katja Hall; ‘With a full year of growth under their belts, service sector firms are more upbeat than they have been for a long time. The recovery continues to strengthen with both consumer and business-facing firms taking on more staff and investing.’
Separate data showed that UK mortgage approvals slipped to an eight-month low.
The Pound was little-changed after the data was published, and Sterling continued trading within touching distance of a 17-month high against a struggling Euro.
However, as Tuesday progressed, the Pound extended modest declines against the US Dollar as a result of several unexpectedly upbeat economic reports for the US.
The US Dollar rallied in response to data showing a surprising surge in domestic durable goods orders and better-than-forecast Markit services/composite PMI measures.
The services gauge rallied from 55.0 in April to 58.4 in March while the composite measure advanced to 58.6 from 55.6.
Both figures were further from the 50 mark separating growth from contraction.
Markit economist Tim Moore said this of the services report; ‘New business growth within the service sector reached its fastest for over three years amid the greatest month-on-month acceleration since the index began in late 2009. An improving service sector picture reinforces the upbeat message from the equivalent US manufacturing survey’.
The US consumer confidence index also climbed from a positively revised 81.7 to 83.0 in May.
It wasn’t all good news however as the Richmond Fed Manufacturing Index held at 7 in May instead of advancing to 8 as forecast.
However, while the US Dollar was buoyed by today’s results, the North American currency could falter against the Pound on Thursday as investors digest final US GDP data.
The growth report is expected to show a negative revision to first quarter expansion.
While initial estimates put annualised US first quarter growth at 0.1 per cent, it is believed that the world’s largest economy actually contracted by 0.5 per cent in the first three months of the year.
If this proves to be the case the Pound could push above recent resistance levels against the US Dollar and trend above 1.69.
Meanwhile, further hints that the European Central Bank intends to deploy additional stimulus when it gathers next week could drag the Euro lower and see the GBP/EUR pairing achieve fresh highs.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6812,
Pound Sterling,,Euro,1.2335,
Pound Sterling,,Australian Dollar,1.8158,
Pound Sterling,,New Zealand Dollar,1.9681,
US Dollar,,Pound Sterling,0.5948,
Euro,,Pound Sterling,0.8107,
Australian Dollar,,Pound Sterling,0.5503,
New Zealand Dollar,,Pound Sterling,0.5083,
[/table]
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