Cautious Optimism For The UK
2 November, 2012
Thursday saw the pound trade in small ranges against most currencies making some initial gains against a spread of currencies including the US dollar which hit a 3 week high, despite the manufacturing data coming out a little lower than forecast. The UK PMI figure came in at 47.5 rather than the 48 expected but more importantly below the figure of 50 which shows contraction in the sector. A figure above 50 shows growth in the sector which obviously is a positive for the economy as a whole.
The reason for the small gains was put down to mild optimism from investors that the UK economy is on the mend, buoyed by the GDP figure last month and retail sales which came in dramatically higher than expected. Still despite this over the course of trade the pound fell away against most currencies dropping 30 points against the US dollar, 1 cent against the Aussie dollar and 1.5 cents against the Kiwi dollar. It seems this was more due to investor confidence than a weak pound as equity markets also had a good days trade.
Sterling/euro peaked and troughed throughout Thursday and is likely to be fairly up and down going forward as investors trade with caution wary of Greece and whether they will manage their next tranche of debt payment and if Spain will ask for a bailout. Holding back the pound is QE although the chance seems to be diminishing, we won’t know for sure until next Thursday when the Bank of England meet and more so when the minutes of that meeting come out a couple of weeks later. Having seen what positive steps in Europe can do to the rates if you have a Euro requirement in the run up to Christmas it might be worth looking to fix it in case we go back to the levels seen in October.
Today is all about non-farm payroll and employment data from the US. We have seen some wildly differing figures recently from expectations so expect volatility across the 3 major currencies if today’s figure is off the mark. From the UK this morning PMI is for the construction sector and in the EU its manufacturing PMI. Get in touch with us at Currency Index today if you have a currency transfer to make and would like some friendly guidance through the process.
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