Pound pops higher after strong manufacturing data

United States Dollar:

Yesterday saw a steady start to the day in FX markets, amid a lack of any top-tier economic data. However, things got going in the afternoon, as rhetoric from various ECB officials supported bids in EUR/USD, dragging GBP/USD with it. As this was happening, investors started to turn risk-averse when it was announced the US were sending a warship to the Black Sea. Equities drifted lower, but the USD continued to weaken and cable continued on its march towards 1.66. This morning, it has made a convincing break above this level, following a survey by the British Chambers of Commerce, published overnight, which showed that growth in the services and export sectors posted their strongest gains since the survey began in 1989. This means GBP/USD traded at 1.6645 before 9.30am. In other news, the US Treasury yesterday expressed concern about the recent movements in the Chinese Yuan, and said that they would become seriously worried should it mean a move away from the market-determined Yuan exchange rate. This will likely be a topic up for discussion at this week’s G20 meetings, along with the low level of inflation in Europe and emerging market issues. UK Manufacturing and Industrial Production data for March both printed stronger than expectations earlier this morning at 1% and 0.9% respectively. These are very impressive numbers and will serve to boost expectations for an early rate hike by the BoE, perhaps even as early as January or February next year, and certainly before the UK general election in May 2015. Although the UK PMIs were weaker than expected last week, these, too, were largely strong numbers. It is data like this that will likely continue lending medium-term support to the pound. It has pushed through 1.67 since.

We expect a range today in the GBP/USD rate of 1.6650 to 1.6745.

Euro:

EUR/USD pushed higher yesterday after the ECB’s Yves Mersch said that “QE is above all a theoretical concept” and “from theory to implementation is a long way”. This put a dampener on investor expectations for the central bank to act on the low level of inflation any time soon, and as Mersch played down the threat of deflation, the euro rallied. EUR/USD pushed higher through stops and on to a high of 1.3748 in the late afternoon. It has rallied again this morning, in part a response to comments from the Bank of Japan governor Kuroda that Japan’s recovery is continuing, following the BOJ monetary policy statement. EUR/USD has popped higher to 1.3765, but GBP/EUR remains steady around 1.21.

We expect a range today in the GBP/EUR rate of 1.2100 to 1.2160.

Aussie and Kiwi Dollars:

Both AUD/USD and NZD/USD are continuing to push higher this morning and open at .9325 and .8665 respectively. Yield demand, a weaker USD and generally strong local economic data are supportive of these gains. GBP/AUD and GBP/NZD are higher, though, following the strong manufacturing data from the UK this morning. They trade at 1.9255 and 1.7885 this morning.

We expect a range today in the GBP/AUD rate of 1.7800 to 1.7940

We expect a range today in the GBP/NZD rate of 1.9200 to 1.9325.

Data releases for the next 24 hours:

AUD: Westpac Consumer Sentiment, Home Loans m/m

EUR: PPI m/m

GBP: NIESR GDP Estimate, BRC Shop Price Index y/y

NZD: No data

USD: NFIB Small Business Index, JOLTS Job Openings