Dear Subscriber, Please find below today's update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements. GBPEUR/GBPUSD The Pound bounced back from the disappointment of the manufacturing PMI data on Tuesday to strengthen by the most in more than a week against the Euro, rising to a fresh 22-month high, while the UK currency slipped back under 1.62 versus the Dollar, amid a decline in risk appetite. The Pound rallied against the majority of the 16 most actively traded currencies, after a report showed that UK construction output declined by less-than-expected in April. Mortgage approvals unexpectedly rose, adding to optimism that the recent contraction in growth will be temporary. Although the Pound is being driven by other factors at present, with demand increasing as a safe haven from its positions outside the Euro-zone, all eyes will be directed to the PMI services data this morning, which will provide a true indication of how the economy will perform this quarter. A dip similar to that of the manufacturing report and the Pound may lose its momentum, as speculation will build that the Bank of England will need to return to quantitative easing to support the economy. The decline in risk appetite has also hurt the higher-yielding currencies like the Australian and New Zealand Dollars, which remained lower ahead of the Spanish bond auction. The well documented problems surrounding sovereign debt issues in the Euro-zone continue to hamper the single currency, but the Euro also came under renewed selling pressure, after reports showed that manufacturing in the region contracted for a ninth consecutive month, while unemployment surged in Germany, adding to pessimism that the Euro-zone recession is deepening. The Pound hit resistance in the region of 1.6230 against the Dollar and traded as low as 1.6160, just under the major support level. The UK currency continued to derive support from speculation that there would be an upward revision in the first quarter GDP data. There was a solid rise in UK lending for March, but there was a further decline in money supply. That will increase fears surrounding the growth outlook, as credit conditions remained extremely tight. Although there has been speculation over defensive inflows in Sterling, official data recorded net capital outflows of gilts for February and March. The focus today will inevitably be on the services sector data this morning, while the Nationwide reported a 0.2% decline in house prices for April. EUR/USD The Euro was again subjected to heavy selling pressure yesterday due to a combination of fundamental and technical factors. The final estimate of Euro-zone PMI manufacturing edged lower to 45.9, deeper into contraction territory, although principal attention will be focused on the peripheral economies, as the Italian index deteriorated sharply for April. There was also depressed readings for the Spanish and Greek economies, which maintained concerns over the outlook. In the U.S, the latest ADP employment report was weaker-than-expected with a 119,000 increase for April following a revised 201,000 gain previously. The report dampened optimism surrounding Friday's payroll report, which reduced support for the Dollar. There is speculation this morning that the ECB could move closer to another long-term refinancing operation at Thursday's governing council meeting, which helped provide some relief to the Euro. There was also some positive news with Standard & Poor's lifting Greece's credit rating out of selective default.
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