Pound to Euro, US Dollar exchange rate: The Pound declined from a 22-month high against the Euro yesterday

Foreign Exchange Rates Currency News - The Pound declined from a 22-month high against the Euro yesterdayThe Euro challenged resistance levels in the region of 1.3250 against the Dollar and pushed briefly to a one-month high before drifting weaker towards the close of trading in Europe last night.

Sterling / Euro and US Dollar exchange rates

The Pound declined from a 22-month high against the Euro yesterday, while the UK currency also tumbled from a 7-month high versus the U.S Dollar, after a gauge of UK manufacturing fell by more than expected in April. The PMI index dropped to a reading of 50.5, just above the line to indicate growth, from 51.9 in March.

The report highlights the need for record low interest rates to aid growth but the significance of the decline in output is greater due to the fact that the UK economy is in a technical recession. Every bit of negative economic data will be heavily scrutinised now and if the services and construction data follows a similar pattern, the appeal of Sterling is likely to diminish.

The Pound was unable to bounce back against the U.S Dollar and encountered selling pressure around the 1.6250 level. The export component of the report showed another decline in orders, as wider Euro-zone confidence deteriorated and there was also a fifteenth successive decline in backlogs, which suggested that production would remain subdued over the coming months.

The construction PMI data will be watched closely this morning and Wednesday services sector data will be extremely important for the Pound given its impact on Bank of England expectations and global risk sentiment. The UK economy unexpectedly contracted in the first quarter, pushing the nation into its first double dip recession since the 1970s, and that was when the PMI data suggested growth was improving.

Initial estimates for the services PMI report will show a drop to 54.1 in April, from 55.2 in March, but a more extensive decline will hurt the Pound. There will be a lot of anxiety in the build up to these reports and the Pound may struggle to gain momentum. The UK currency has gained 1.4% in the past month of a trade-weighted basis but we could be set for a renewed downturn if the data points to a deeper recession.

Euro / US Dollar

The Euro challenged resistance levels in the region of 1.3250 against the Dollar and pushed briefly to a one-month high before drifting weaker towards the close of trading in Europe last night. European markets were closed for the May day holiday, which meant the market lacked direction to a degree, but political tensions remained high ahead of Sunday’s Dutch election.

There was also an element of uncertainty surrounding the Greek election with former Finance Minister Venizelos warning that Euro membership was not certain. There were further concerns over the Spanish economic outlook with a particular focus on the banking sector given the scale of bad debts.

In the U.S, the latest ISM manufacturing index was stronger-than-expected with an increase to a 10-month high for April. All of the main components of the report posted strong gains and that has alleviated some of the concern surrounding the U.S economic outlook. There will still be an element of caution with the non-farm payrolls data due for release this Friday.

Data Released Today

GER 08:55 – Unemployment (April)

EU 08:58 – Markit Manufacturing PMI (April)

U.K 09:30 – Consumer Credit / Mortgage Approvals (March)

U.K 09:30 – Construction PMI (April)

EU 10:00 – Unemployment (April)

U.S 13:15 – ADP Employment Report (April)

U.S 15:00 – Factory Orders (March)

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Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/l0Yir101QD0/

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