Daily digest market movers: Pound Sterling extends winning spell for third trading session
- The Pound Sterling turns sideways after advancing to 1.2660 against the US Dollar. The asset is expected to extend the upside as market sentiment is bullish, and a weak United States ISM Services PMI has knocked down the US Dollar. S&P 500 futures have posted significant gains in the Asian session.
- On Wednesday, the US Services PMI surprisingly fell to 51.4 in March from expectations of 52.7 and the former reading of 52.6. The Services PMI gauges business activity in the service sector, which accounts for two-thirds of the US economy. Therefore, the impact of a poor Services PMI was significantly adverse for the US Dollar, dragging the US Dollar Index (DXY) by more than 0.5% to 104.15. The ISM report also showed that new orders and prices paid subindexes fell significantly.
- This week, the major driver for the US Dollar will be the US Nonfarm Payrolls (NFP) report for March, which will be published on Friday. The economic data will significantly impact market expectations about whether the Federal Reserve will start reducing interest rates from the June meeting. The NFP report is expected to show that 200K workers were hired over the month, lower than February’s reading of 275K.
- On the UK front, the Pound Sterling will be guided by market expectations over Bank of England rate cuts and the S&P Global/CIPS Services PMI, which will be published at 08:30 GMT. Investors expect the BoE to kick-start the rate-cut cycle in June as the United Kingdom inflation is slowing consistently. For the whole year, BoE Governor Andrew Bailey said he sees two or three rate cut expectations as “reasonable.”
- The Services PMI is forecasted to have remained unchanged from its preliminary reading of 53.4. An upbeat PMI data would strengthen the UK economic outlook. This week, the final Manufacturing PMI reading for March, released on Tuesday, returned to growth after contracting for 20 straight months.
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