Sterling strength continues while euro is trading flat. Market awaits US Non-Farm Payroll figures

Tom Tong02/May/2014Currency Updates

GBP

London closed with sterling again ticking up across the board. Manufacturing and services data came in better than anticipated. UK manufacturing PMI came in at 57.9, much stronger than the 55 called. The reading suggests that the relatively swift recovery of the sector shows little signs of slowing.

The resulting rally catapulted sterling to 5-year highs against the greenback and further gains across the board.

The employment part of the PMI was once again impressive, displaying a solid 3-year high; this means 12 months consecutive improvement for the jobs market. Elsewhere, the housing market remains rosy with prices across the UK up 10%; the gains are the fastest increase in nearly 7 years. Predictably market chatter centres on the potential housing boom, however nationwide there remains a shortfall of housing and prices are yet to hit the highs seen before the recession, therefore there is room for prices to further increase.

Sterling strength displays little sign of abating. Traders are mostly poised on today’s Non-Farm Payroll prior to entering positions.

Only data of note today is construction PMI.

EUR

London closed with the euro mostly flat against sterling and the dollar. With the market still meditating on Wednesday’s inflation figure and Labour Day in France and Germany, we saw slimmer volumes than typical and no notable pivots.

Pretty much across the board we saw the euro trading in narrow ranges, with traders reluctant to enter positions prior to today’s Non-Farm Payroll.

Fairly big day for the Eurozone today with Markit manufacturing PMI and the unemployment rate set for release.

USD

The dollar had some relief yesterday after a dreadful week, with trading mercifully flat against its major peers.

Contradictory manufacturing surveys from Markit and ISM, with the former dropping off from expectations and the latter beating them. Other data as of yesterday was reasonably positive, which is a sign that the US economy is presently doing well. Recent GDP readings were for Q1 but recent data would suggest Q2 readings will be much stronger.

In a possibly worrying precursor to today’s Non-Farm Payroll figures, initial and continuing jobless claims came in under expectations yesterday at 344k and 2.771m respectively. The greenback is in desperate need of a powerful Non-Farm Payroll reading today, after a GDP shocker earlier in the week pushed it down to fresh 5 year lows against the pound. With the street calling 210, anything under 200 would be a disappointment.

As well as Non-Farm Payroll, we also have the release of unemployment, factory orders and average earnings data.

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Written by Tom Tong

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