Forex Market Review (European Session) – Strong UK manufacturing PMI boosts sterling; dollar at 1-½-month high versus the yen

Forex Market Review (European Session) – Strong UK manufacturing PMI boosts sterling; dollar at 1-½-month high versus the yen

The strong manufacturing PMI number out of the UK as well as economic releases out of the Eurozone, were among the highlights of the day in terms of data hitting the markets during today’s European session trading. Beyond these, geopolitics were once again an important factor affecting investor sentiment.

The dollar index, measuring the greenback’s strength versus the currencies of six major trading partners, was up one-tenth of a percent and slightly above the 99 level during late European session trading hours. Relative to the yen, the US currency recorded a near one-and-a-half-month high of 112.30 in today’s trading as it was helped by higher Treasury yields. The move in yields was attributed to comments of issuing “ultra” long-term government bonds by US Treasury Secretary Steven Mnuchin. Dollar / yen was last trading 15 pips below the aforementioned high, while it started the day below the 112 handle.

In terms of important economic releases, the UK manufacturing PMI number for April came in at the three-year high of 57.3, exceeding forecasts for a reading of 54.0 and the 54.2 from the previous month. Growth in overseas orders is indicative of the fact that factories are benefitting from the weaker pound following the Brexit vote shock back in June. The seemingly improving global economic output appears to be conducive to the strong number as well. Upon release of the data, pound / dollar spiked up from 1.2883 to 1.2912. The pair managed to build on earlier momentum and was last trading further up at 1.2423. Versus the euro, sterling experienced a similar spike with euro / pound falling to 0.8448 from 0.8465 before the data release. Euro / pound was last down for the day, trading at 0.8429. Reports of the EU taking a tough stance on Britain’s exit from the union could possibly limit the pound’s upside potential relative to the euro further ahead.

The final Eurozone manufacturing PMI for the month of April was released as well. The figure came in at 56.7, marginally below the expected 56.8 but above the respective figure from March which stood at 56.2. Despite missing forecasts, the reading is encouraging as it shows factory activity in the euro area increased at its fastest pace in six years. Euro / dollar didn’t react much to the data.

In other data pertaining to the Eurozone, the unemployment rate for March came in unchanged to the near eight-year low of 9.5%. This was above projections for a rate of 9.4%. Again, euro / dollar didn’t have much of a reaction to the data. The pair was last flat on the day and marginally below the 1.09 level.

Regarding today’s bi-weekly global dairy auction, which tends to have an impact on the kiwi as New Zealand is a major dairy exporter, milk prices rose 3.6% relative to the auction from two weeks ago while volumes dropped 1.3%. The New Zealand dollar gained relative to its US counterpart after the release of the data. Kiwi / dollar was last up on the day while it recorded a six-day high of 0.6936 earlier in the day.

Finishing with a quick look at gold, the precious metal fell to a three-week low of $1251.81 an ounce today as the safe-haven perceived asset keeps on losing part of its allure on receding fears of populist forces posing threats to the Eurozone. Later in the day, the yellow metal rebounded from its daily low to trade only slightly below the day’s open of $1255.86 an ounce. Resurfacing tensions between the US and North Korea after the easing comments by US President Donald Trump, who said that he would be honored to meet North Korean leader Kim Jong Un, might have contributed to the rise.

Source: Trade Forex with XM.

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