Sterling hit again after a disappointing PMI release
Adam Stark
Giving Corporate Partners The Confidence To Make Profitable Currency Decisions | Director of Corporate Partnerships at Central FX
The dollar moved sharply higher during Tuesday as yield expectations provided a further boost. The currency index moved above 92.0 and also moved above the 200-day moving average for the first time since early 2017 on widespread buying.
Gold weakened to 4-month lows near $1,300 per ounce before a limited correction as defensive assets failed to gain significant support.
Sterling came under renewed selling pressure after a disappointing PMI release and underlying sentiment remained extremely fragile with GBP/USD at 3-month lows.
Relatively hawkish Bank of Canada Governor Poloz rhetoric allowed the Canadian dollar to buck the strong US trend.
The UK PMI manufacturing index declined to 53.9 for April from a revised 54.9 the previous month and the lowest reading for 17 months. New orders growth slowed to a 10-month low while employment growth also slowed. Inflation pressures remained elevated in historic terms, although the rate of increase slowed to a 9-month low.
The latest consumer lending data was also weaker than expected with the annual increase in consumer credit growth the weakest since November 2015, although business lending strengthened slightly.
The data triggered fresh doubts surrounding the growth outlook and reinforced market expectations that the Bank of England would now decide against a May rate hike with futures markets suggesting the chances of a hike were only 15%.
Sterling was subjected to renewed selling pressure and, as the US currency surged higher, GBP/USD pair declined to 3-month lows just below 1.3600. GBP/EUR moved back towards 1.1320. Weak Sterling sentiment dominated with Brexit uncertainty also a significant negative factor amid the on-going customs union row and speculation over a leadership challenge to Prime Minister May.