[vc_row][vc_column][vc_column_text]A trio of underwhelming UK PMIs prompted the pound to slump sharply last week as investors bet on the prospect of a second quarter growth contraction.

Worries over the health of the Eurozone economy also picked up in the face of a sharp fall in German factory orders, leaving the euro under pressure.

Friday’s stronger-than-expected US payrolls report saw USD exchange rates trending higher across the board, meanwhile, in spite of the rising odds of a near-term Federal Reserve interest rate cut.

Anxiety over trade kept both the Australian and New Zealand dollars on a weaker footing, with the odds of further monetary loosening increasing.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Disappointing UK PMIs push pound lower as Brexit anxiety mounts

Confidence in the outlook of the UK economy continued to deteriorate last week as June’s set of UK PMIs all fell short of forecasts, driving the pound to a fresh two-year low against the US dollar.

Investors were particularly discouraged to find that the services PMI had unexpectedly slumped to just 50.2, only narrowly avoiding stagnation.

As the service sector remains the primary growth engine of the UK economy this slowdown bodes ill for second quarter gross domestic product and raised the risk of contraction.

Coupled with an underwhelming first quarter labour productivity figure this left GBP exchange rates on the back foot heading into the weekend.

The mood towards the pound could sour further this week if May’s GDP data disappoints.

Evidence that the economy continued to lose momentum in May would further increase the odds of a second quarter slowdown, putting additional pressure on GBP exchange rates.

However, a narrowing of the UK trade deficit may offer the pound a boost in the short term on Wednesday, especially if the accompanying industrial and manufacturing production figures show an improvement.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

US dollar recovers ground after strong payrolls report

A solid increase in the headline US change in non-farm payrolls figure offered a boost to the US dollar ahead of the weekend, in spite of an accompanying uptick in the unemployment rate.

As the increase in the unemployment rate was driven by a higher participation rate, any negative impact on USD was mitigated, even though wage growth failed to pick up.

While this latest sign of labour market tightening is unlikely to be enough to alter the current policy outlook of the Federal Reserve the data still offered the US dollar a boost.

The continued widening of the US trade deficit put some pressure on USD exchange rates, meanwhile, as markets continued to wait for signs of progress towards a US-China trade agreement.

If June’s set of Federal Open Market Committee (FOMC) meeting minutes point towards policymakers cutting interest rates in July this could see the US dollar trending lower across the board.

Focus will also fall on the consumer price index data, with forecasts pointing towards an easing in inflationary pressure on the year.

Even though the CPI is not the Fed’s preferred measure of inflation, a weaker showing here would still increase the odds of interest rates falling before the end of the year.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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