Dollar advances on strong data, as Greece concerns weigh on the Euro
02/Jun/2015 • Currency Updates•
This week started as last week ended, with the Pound lower against a strong Dollar. Sterling finished the London session 0.5% down on the Greenback.
Manufacturing output inched moderately higher last month according to the latest PMI from Markit released yesterday morning. Growth in the sector improved to an index of 52.0, having declined to a revised seven month low of 51.8 in April. While a strong level of domestic demand continues to boost growth, this was largely offset by weak exports as a result of a generally stronger Pound. Manufacturing looks set to provide a minor drag on the economy when it comes to the release of first quarter growth data, with Britain’s factory output expanding by just 0.1% in the first three months of the year.
The Bank of England will be announcing the latest mortgage approvals and consumer credit figures this morning, ahead of this month’s monetary policy committee meeting, taking place on Wednesday and Thursday this week.
A lack of major economic releases in the Eurozone meant attention was yet again on Greece, as the country entered a crunch month of payment deadlines. Concerns surrounding the country caused the Euro to fall by 0.2% versus the Dollar.
While there were no major data releases yesterday, it was announced that manufacturing expansion slowed slightly in the Eurozone last month. The PMI from Markit dipped from 52.3 to a modest 52.2, following below-forecast growth in Germany and another month of contraction in France. Elsewhere, inflation in Germany printed higher in May, up by 0.1% to an annualised 0.7%. However, worries about Greece weighed on the Eurozone yesterday, with the Greek government missing its self-imposed Sunday deadline for reaching an agreement with its creditors. The country approaches its first IMF payment on Friday, one of five this month. If the country were to miss the payment, it would be the first time in the organisation’s 70 year history that this was the case.
This morning will see the crucial release of inflation figures for the Eurozone for last month at 10am BST.
The Dollar continued its advance against the other major currencies as markets opened for the week following a set of stronger than expected data releases. The US Dollar index finished the London session 0.35% higher.
Expansion in the US manufacturing sector accelerated in May, rebounding from its slowest pace in almost two years. The Institute of Supply Management’s manufacturing PMI increased well above forecast from 51.5 in April to 52.8 last month, its strongest growth since February. This marked the thirtieth consecutive month of expansion, due in part to increased new orders and an improved labour situation. A similar survey from Markit came in slightly below forecast, although also implied a slight uptick in growth, with the PMI increasing from 53.8 to 54.0.
Earlier, it was revealed that US consumers remained cautious in April, with consumer spending unchanged from a month previous. Consumer spending, which accounts for over two-thirds of overall growth, is expected to rebound as the temporary effect of harsh winter weather abates. This data came in was despite consumer income actually increasing by 0.4%. In other releases, construction spending increased by 2.2% in April, the most since 2010.
Only a handful of second tier data releases in the US today. Factory orders at 3pm London time looks set to be the focus. Much attention, however, will instead turn to Friday and the critical nonfarm payroll announcement.
Rest of the world
The Chairman of the Swiss National Bank claimed that the Swiss Franc is too strong and the central bank is ready to intervene if necessary. Meanwhile, the Norwegian Krone fell against the Euro by the most in four months after Norwegian manufacturing growth contracted at its fastest pace in almost two years.