FX round-up: Cable unfazed by data showing stalling economy

Cable finished the session flat despite a barrage of data which raised the possibility that uncertainty ahead of the Brexit referendum might bring economic growth to a halt.

Sterling was up by a fraction to 1.4497 against the US dollar as of 16:19 BST and just about in the middle of the day’s trading range.

In parallel, euro/dollar was down by 0.74% to 1.1402 and dollar/yen was to be seen gaining 0.28% to stand at 107.33.
Dollar/CHF jumped 1.04% to 0.9676. The US dollar spot index was up by 0.57% to 93.713.

Markit’s UK services purchasing managers’ index retreated from a reading of 53.7 in March to 52.3 for April (consensus: 53.5).

The data showed uncertainty around the referendum had brought “the recovery to its knees”, Samuel Tombs, chief UK economist at Pantheon Macroeconomics said.

A sub-index tracking levels of output in manufacturing released on 4 May declined by 2.8 points to 50.1 – the least since March 2013 – while the construction PMI fell for a fourth consecutive month.

Tombs explained that a weighted average of the construction, manufacturing and service PMIs pointed to gross domestic product growth of nil in terms of quarterly rates of change.

“The deterioration in April pushes the surveys into territory which has in the past seen the Bank of England start to worry about the need to revive growth, either by cutting interest rates or through non-standard measures such as QE,” Chris Williamson, chief economist at Markit, chipped in.

Acting as a backdrop, initial US jobless claims rose by 17,000 over the week ending on 30 April to hit 274,000 (consensus: 260,000).

That followed a weaker than expected reading on the US ADP payrolls reports on the previous day that set off talk in some quarters of the possibility of a looming slowdown in job growth Stateside.

Overnight, the president of the Federal Reserve bank of Minneapolis, Neel Kashkari, said that given low inflation the Fed needed to see further improvement in the labour market and to raise rates only it was certain the economy could weather a hike.

Further afield, the US dollar was on the back-foot versus Brazil’s real, slipping by 0.41% to 3.5344, as oil prices staged an advance, alongside a 1.71% drop against the Russian ruble to 65.54.

The greenback was also lower versus Turkey’s lira, giving back 1.26% to 2.9250, following a 4.0% surge on 4 May after Prime Minister Ahmet Davutoglu announced his resignation.

To take note of, there was also persistent 'market chatter' on Thursday about continuing outflows from Japanese equities.