After a fair size move higher yesterday, the FTSE 100 is giving back some of its gains this morning with the benchmark remaining within last week’s range. It’s a similar story for the poundwhich is little changed on the day but remains above the 1.29 handle and near its 2017 highs against the US dollar.
More strong UK data
Coming hot on the heels of Tuesday’s stellar manufacturing print, the UK construction PMI this morning has also beat consensus estimates in rising to its second highest level since the Brexit vote.
Following the disastrous release in July 2016, which was at a multi-year low, this economic indicator went on a run of six successive prints above forecast. However there has been a bit of a cooling off in 2017 and today’s beat will go some way to reassure traders that the UK economy remains robust despite the ongoing Brexit developments. The pressure has been taken off tomorrow’s services equivalent to a certain extent given the strength seen so far in the PMIs, but it still remains the most widely viewed of the three.
External forces to drive the next move in the pound
Whilst the pound remains well supported and elevated across the board since the sharp rally after Theresa May called a snap election, the next moves could well come from external rather than internal forces.
Barring a major shock in tomorrow’s services PMI data, the residing feeling from this latest round of UK data will be one of continued strength, however there are several potentially key events ahead which could move the pound on a relative basis. First off there’s the Fed rate decision this evening, and even though the vast majority expect no change in US central bank policy, any amendment to the accompanying statement and allusions for, or against, a June rate hike could see a significant move in the US dollar .
Along similar lines, the euro could be in for some volatile moves in the coming days as the second round of the French elections approaches and whilst many seem of the assumption that market-friendly Macron is a shoe-in, there could be some last minute jitters before the French go to the polls this Sunday. Therefore it seems likely that the driving force in the GBP/USD and EUR/GBP crosses will come from the non-GBP part of the pairs in the coming sessions.