Pound Stabilises, Focus Shifts to Canadian Rate Decision
GBP
GBP/USD is trading at 1.2773 (interbank) and GBP/EUR at 1.1750 (interbank).
The UK services sector saw a decrease in growth in May from April's peak in 11 months, with inflation pressures hitting a three-year low, according to a recent survey. This might pave the way for a potential Bank of England rate reduction later in the year. The S&P Global UK Services PMI dropped to a six-month trough of 52.9 from 55.0 in April, consistent with initial estimates. The overall PMI, incorporating earlier manufacturing data, also dipped to a two-month low of 53.0 from 54.1 in April.
This news isn't likely to comfort Prime Minister Rishi Sunak, who, according to polls, might face a significant loss in the July 4 national election. However, this scenario could reinforce the Bank of England's inclination toward a rate cut soon.
Yesterday's fiery debate between Rishi Sunak and Sir Keir Starmer marked the general election's initial leader’s debate, showing a slight edge for Sunak according to early polls. Despite Sunak’s strong performance, he was met with criticism from an audience concerned about NHS, education, and living costs issues. A YouGov poll after the debate showed Sunak narrowly leading, indicating ongoing uncertainty in the electoral race.
Today’s Events (GMT):
09:30 - Composite PMI (May) - Actual: 53.0 vs Forecast: 52.8
09:30 - Services PMI (May) - Actual: 52.9 vs Forecast: 52.9
EUR
EUR/USD is trading at 1.0880 (interbank) in today’s trading session. This morning, Eurozone business activity showed its most robust expansion in a year for May, propelled by growth in the services sector, with manufacturing also demonstrating positive developments, diminishing fears of a recession.
The HCOB's composite Purchasing Managers' Index (PMI) climbed to 52.2, slightly missing forecasts but still signalling expansion. The services PMI marginally declined to 53.2 from an 11-month peak of 53.3 in April, narrowly under the preliminary estimate of 53.3.
Investors remain cautious, anticipating the pivotal ECB monetary policy meeting tomorrow. It is broadly anticipated, following recent statements by officials, that the ECB will likely reduce interest rates by 25 basis points. This anticipated reduction, the first since March 2016, will be accompanied by the latest economic outlooks.
These developments, along with remarks from ECB President Christine Lagarde, will be closely analysed for indications regarding potential future rate reductions following May’s increase in Eurozone inflation. These factors will significantly influence the trajectory of the Euro going forward.
Today’s Events (GMT):
08:55 - German Services PMI (May)? - Actual: 54.2 vs Forecast: 53.9
09:00 - S&P Global Composite PMI (May) - Actual: 52.2 vs Forecast: 52.3
09:00 - Services PMI (May) - Actual: 53.2 vs Forecast: 53.3
21:30 - ECB McCaul Speaks
领英推荐
USD
The Dollar Index, which tracks the U.S. dollar against a consortium of six major currencies, held steady at 104.14 in early trading, after dipping to a near two-month low of 103.99 yesterday. The dollar slightly relinquished some recent gains as the benchmark 10-year Treasury yields hovered around their lowest in nearly three weeks.
Improved broader risk sentiment, spurred by weak U.S. data, has fuelled speculation that the Federal Reserve might soon initiate interest rate cuts. However, investors remain cautious, hesitant to heavily invest in risk-oriented assets awaiting further signals on U.S. interest rates this week.
The ISM Services PMI, which measures activity in the service sector accounting for two-thirds of the economy, is set to be released this afternoon. It's expected to show growth, with an estimate of 50.5, up from the previous 49.4.
Additionally, Non-Manufacturing and Global Composite PMI data are also due for release soon. Nevertheless, the focal point this week is firmly on Friday's nonfarm payrolls report, which is anticipated to provide crucial insights into the state of the labour market.
Today’s Events (GMT):
13:15 - ADP Nonfarm Employment Change (May) - Forecast: 173K
14:45 - S&P Global Composite PMI (May) - Forecast: 54.4
14:45 - Services PMI (May) - Forecast: 54.8
15:00 - ISM Non-Manufacturing PMI (May) - Forecast: 51.0
CAD
USD/CAD is trading at 1.3676 (interbank) in this morning’s trading session.
The spotlight is on the BoC interest rate decision expected later today. The BoC has maintained its policy rate at 5.0% since July 2023, but due to signs of moderating inflation, the market anticipates a reduction in the overnight rate by 25 basis points to 4.75%. Over the year, the market forecasts a total reduction of 59 basis points.
BoC Governor Tiff Macklem noted at the previous rate meeting that an initial rate cut in June was "a distinct possibility."
Oil prices has declined, Brent crude has slightly dropped by 0.1% to $77.44 a barrel, and West Texas Intermediate crude futures have also decreased by 0.1% to $72.98 a barrel, with both nearing their lowest levels since early February.
Today’s Events (GMT):
14:45 - BoC Interest Rate Decision and Press Conference - Forecast: 4.75%
?
For further analysis or to book a transaction, please get in touch: