The pound against the dollar could not hold on to the gains achieved on Monday, as a result of which the pair climbed above 1.39 again after it was lowered yesterday due to internal uncertainty. Awaiting the Bank of England (BoE) decision on Thursday and local elections in the UK appear to have weakened buying support for the pound, outweighing upbeat manufacturing numbers.
The May elections may indicate the extent to which the recent Downing Street scandals have affected voters’ confidence in Prime Minister Boris Johnson and the inevitability of political instability. Meanwhile, the Scottish National Party says that if it wins a majority in tomorrow’s delegated Scottish parliamentary elections, which are held at the same time as local elections in the UK, the assembly will pass its own law to hold a second referendum by the end of 2023.
Growth in the UK manufacturing sector accelerated in April as production expanded for the 11th straight month. The IHS Markit / CIPS UK Manufacturing Purchasing Managers Index (PMI) jumped to 60.9%, the highest since 1994 and beat economists’ forecasts by 60.7%.
The multi-year record growth was driven by a third straight month of new orders, as customer confidence rose following the reopening of large sectors of the economy. Employment in this sector also rose for the fourth straight month, driven by business growth. However, supply chain delays caused by Brexit and Covid-19, as well as a lack of resources, have driven prices up again, sparking concerns about inflation.
The pound stabilized against the dollar overnight, before climbing back above 1.39.
US manufacturing orders rebounded in March
New orders for goods made in the US rebounded in March, and plant spending on equipment was higher than forecast. Manufacturing orders were supported by strong domestic demand, although growth could have slowed due to supply chain bottlenecks. Data released by the Commerce Department on Tuesday showed that orders increased 1.1% in March and fell 0.5% in February. Economists had forecast factory orders to rise 1.3%.
The trade balance of goods and services – the balance between exports and imports of goods and services – published by the Bureau of Economic Analysis and the US Census Bureau also made headlines yesterday, reaching $ 74.4 billion above the forecast of $ 74.5 billion. in March. While a negative reading indicates a trade deficit, the slight improvement was a move in the right direction for the dollar.
The blank economic calendar in the UK today means that investors’ attention will be drawn to tomorrow’s Bank of England policy statement in May. With no change expected, the pound could feel the weight of the central bank maintaining its dovish policy stance for the foreseeable future.
Today’s US dataset includes the latest ADP employment change, Markit Services PMI and ISM Services PMI.