Sterling saw impressive gains against the dollar yesterday but after an initial spike against the euro, we saw GBP/EURfall back through the 1.38 handle. Continuing impressive UK economic data has been a helping hand for the UK’s currency and yesterdays UK factory orders didn’t disappoint, surging to an 8-month high. UK factories shook off market woes in the first quarter of this year as business activity in the sector rebounded from a tentative slow-down at the end of last year. The overall business has been bolstered by stronger domestic demand and significantly low production costs, easing the pressure on factory margins. In March, Markit’s manufacturing PMI came in at 54.4, compared to a downwardly revised reading of 54.0 in February, and remained in expansion territory for the 24th consecutive month. The reading is in line with expectations. Growth of production and new orders increased while production costs continued to fall, the survey also showed. Sterling was also helped as the dollar was sold off after weak jobs data state side. Cable surged over a cent to trade over the $1.4850 level, from $1.4743 earlier in Wednesday’s trading session. Against the euro we did initially see GBP/EUR brake through the 1.38 handle, but the currency pair did suffer as traders bought the euro to push GBP/EUR down towards the 1.37 handle.
The shared currency is extending the upbeat momentum on Thursday, now sending EUR/USD higher to test session highs around 1.0820. Developments from Greece will continue to be the almost exclusive catalyst for the pair, along with the upcoming releases in the UK economy, From the single currencies point of view, the ECB will publish its Accounts of the last meeting, although their impact on markets appear as dubious. On the Greek front, the country submitted a 26-page list of reforms on Wednesday although no bailout funds were released. Athens urged its EU peers to unlock the much-needed funds as the euro itself could be in danger otherwise. However, EU officials estimated that the reforms could be reviewed in the next Eurogroup meeting on April 24.
The dollar dipped against the yen and the euro in Asian trade Thursday, with many investors sitting on the sidelines ahead of U.S. jobs data Friday or staying away from the market before the Easter holiday season. The U.S. currency was recently at ¥119.59, compared with ¥119.75 late Wednesday in New York. The euro was at $1.0781 from $1.0763. Against sterling we saw the greenback give up over 1 cents as GBP/USD rallied back over the $1.48 handle. Market participants said thin trading volumes ahead of the Easter holiday season and the release of the labour report often make currency trade vulnerable to fluctuations even with relatively small amounts of orders. Amid the wait-and-see mood, the currency market showed little interest in a rebound in the Nikkei Stock Average NIK, +1.18% , which was up 1.8% midday and poised to gain on a closing basis after two-day losing streak. Disappointing private sector U.S. payroll data overnight “helped lower the market’s view point,” on Friday’s nonfarm payrolls report for March. Still, with fewer market participants, even in the aftermath of the labour data the currency market will likely lack clear direction until next week when liquidity will go back to normal levels. The WSJ Dollar Index a measure of the dollar against a basket of major currencies, was down 0.1% at 87.56.