the pound fell this morning after one-off Flash Markit Manufacturing and Services PMI for July both fell below the key 50 mark. The releases are being closely watched as markets seek to gauge the initial impact of the Brexit vote. Manufacturing PMI fell from 52.1 to 49.1 and Services PMI fell more than expected from 52.3 to 47.4. Reuters has reported that this is the largest drop in Services PMI on record, and it is the lowest level since 2009. GBP/EUR fell around 0.7% from around 1.2020 and GBP/USD fell around 0.8% from around 1.3280 on the releases. Of note yesterday, largely positive US data supported the dollar, and the ECB announced it would keep interest rates unchanged and left the door open for future stimulus. The main refinancing rate remains 0.0% and the deposit rate -0.4%. The size and duration of monthly QE purchases are also unchanged. Other items on the day’s calendar include this afternoon’s Canadian CPI and Retail Sales figures and the US’s Flash Manufacturing PMI (13:30 BST).
GBP/EUR: Currently trading at 1.1951
The rate fell approximately 0.58% to 1.1925 yesterday morning around the release of disappointing UK Retail Sales. The rate reversed earlier losses before falling again heading into the ECB press conference as the euro strengthened after the ECB kept interest rates and QE purchases unchanged. The rate then reversed earlier losses, picking up approximately a cent, breaking back above 1.20 in the afternoon.
The pound fell against the euro this morning after Manufacturing and Services PMI figures fell. The pound had been trading above 1.20 ahead of the releases. The releases may maintain the pound at lower levels against the euro. This morning’s Eurozone Flash Manufacturing and Services PMI figures came in roughly in line with or above expectations.
GBP/USD: Currently trading at 1.3180
Cable dropped 0.60% as UK Retail Sales disappointed, picking back above 1.32 in the afternoon. The rate then fluctuated between 1.3160 and 1.3225 throughout the afternoon. US data were largely positive, as the Philadelphia Fed Manufacturing Index fell to -2.9 and weekly Unemployment Claims, which were forecast to increase, were largely unchanged at 253K.
The key releases for this pairing today are this morning’s UK Flash PMIs. The pound fell approximately a cent against the dollar as both indices dropped, with the Services index at its lowest levels since 2009. This afternoon, the US’s Flash Manufacturing PMI is forecast to increase from 51.3 to 51.9, which may offer the dollar some support. The rate may remain around this lower level or weaken further.
EUR/USD: Currently trading at 1.1029
The euro strengthened above 1.1055 around the ECB meeting, falling below 1.0980 before correcting back above 1.1000. Mixed US data, out around the start of the press conference, added to fluctuations, with the dollar receiving support as weekly Unemployment Rate claims remained around 253K. The rate ended the day around market opening levels.
Attention today will be on Flash PMI figures from both the Eurozone and the US’s Flash Manufacturing PMI. This morning’s Eurozone, German, and French PMI figures were largely in line with or above expectations. This afternoon’s US Manufacturing PMI is forecast to increase from 51.3 to 51.9 and may offer the dollar some support.