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Pound at risk of further weakness on UK construction PMI

business-articlesPound at risk of further weakness on UK construction PMI
  • Weakness in the UK construction PMI could add to pound losses
  • Euro looks for rallying point on Eurozone producer price index data
  • Stronger services PMI could boost Australian dollar
 
 
Pound vulnerable ahead of UK construction data
 
In the wake of Friday’s underwhelming UK manufacturing PMI investors are wary of another weak performance from the corresponding construction PMI.
 
Although the construction PMI only contributes a small fraction to the UK gross domestic product any signs of a slowdown here could still weigh on the pound.
 
If the sector slips closer to a state of contraction this could see GBP exchange rates slump sharply.
 
Unless the UK economy can demonstrate signs of resilience in the face of Brexit-based uncertainty the pound could struggle to return to a stronger footing.
 
 
Signs of stronger Eurozone inflation to support euro
 
A stronger showing from January’s Eurozone producer price index data could offer a boost to the euro today.
 
Signs of mounting inflationary pressure within the Eurozone economy may help to limit the dovish bias of European Central Bank (ECB) policymakers.
 
On the other hand, another contraction in prices on the month would leave the euro exposed to a fresh bout of selling pressure.
 
Without evidence of stronger inflation the case for further ECB monetary loosening looks set to mount.
 
 
Robust services PMI may boost Australian dollar
 
The Australian dollar could shake off market risk aversion this evening if February’s Australian services PMI strengthens on the month.
 
A robust month of growth for the service sector would improve confidence in the outlook of the Australian economy as a whole, to the benefit of AUD exchange rates.
 
However, if the service sector shows signs of a slowdown the mood towards the Australian dollar may sour further tonight.
 
Support for AUD exchange rates is likely to prove limited as markets brace for the latest Reserve Bank of Australia (RBA) policy meeting.
 
 
Upcoming Data:
 
Monday, 4th March 2019

09:30 GBP Construction PMI
10:00 EUR Eurozone Producer Price Index
21:30 AUD Services PMI
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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