The Euro encountered strong resistance close to the 1.3160 level ahead of the ECB meeting and drifted lower following Draghi’s comments.
Sterling / Euro and US Dollar exchange rates
The Pound declined for a fourth consecutive day against the U.S Dollar, as a report yesterday showed that growth in UK services industries slowed by more than initial forecasts in April, while a separate report from Nationwide confirmed that house prices fell in April. The UK currency slipped back towards pivotal support in the region of 1.6170 against the Dollar, as the services data dropped to 53.3, from 55.3 in March.
The Pound remained broadly unchanged against the Euro and the Australian Dollar, however, the report showed that growth in services was still well above the line that would indicate contraction. There is speculation that the GDP figures will be revised higher for the first quarter and the data, although not ideal, doesn’t do anything to discourage that.
The Pound also stood firm as the business expectations component of the services data rose to the highest level in 25-months, as hiring intentions also strengthened. Although there was still a high degree of uncertainty, the net result from this week’s surveys on manufacturing, construction and services has reduced expectation of further quantitative easing, which will help support the Pound.
The Pound bounced back towards 1.62 against the U.S Dollar last night, as support held strong at 1.6170. Bank of England governor Mervyn King said yesterday that the economy isn’t yet “back to health” and will need the support of low interest rates “for the time being”. The BoE is not expected to tighten monetary until the fourth quarter of 2013, as inflation expectations slide.
The Euro continued to decline against the U.S Dollar, as the ECB held interest rates unchanged and the Chairman Mario Draghi hinted that further stimulus measures may be introduced to counter the debt crisis. The Pound has risen through 2.00 against the New Zealand Dollar, after unemployment in NZ surged to the highest level in almost two years.
Euro / US Dollar
The Euro encountered strong resistance close to the 1.3160 level ahead of the ECB meeting and drifted lower following Draghi’s comments. His reference to downside risks to economic growth has spurred speculation that the ECB will introduce some form of monetary stimulus to improve confidence. Draghi also stated that there had been no discussion surrounding specific interest rate cuts, which is somewhat surprising given the weak tone of recent economic data.
The impact of the ECB press conference was to essentially dampen expectations of a near-term cut in rates, which helped underpin the Euro to a degree. There were still political uncertainties surrounding Sunday’s French and Greece elections this weekend with fears that the pro-austerity Greek parties would not be able to secure a majority vote.
There was a decline in U.S jobless claims to 365,000 in the latest week from 392,000 the previous week, which provided some relief to economic sentiment. In contrast, there was a decline in the export and employment components for the index, although they were still comfortably above the 50 level to indicate growth. The data will maintain a high degree of uncertainty over the monthly payroll report this afternoon.
Data Released Today
EU 08:58 Markit Composite PMI (April) – Services PMI
EU 10:00 Retail Sales (March)
U.S 13:30 Non-Farm Payrolls (April) – Unemployment Rate – Average Earnings
- Foreign Currency Rate Forecast News – The Pound declined against the Euro exchange rate for the sixth consecutive day
- The Pound rallied for the second consecutive day against the Euro exchange rate while the Dollar came under renewed selling pressure
- Pound Sterling, the Euro and US Dollar Currency News – The Pound declined against the U.S Dollar for the fourth straight day
- Sterling, US Dollar and Euro exchange rates – The Pound rallied against the Euro for the fourth day in a row
- Pound to Euro, US Dollar exchange rate: The Pound declined from a 22-month high against the Euro yesterday