The pound fell back on Friday, with the currency being shunned by markets as the UK’s first quarter growth was unexpectedly revised lower.
Sterling appears buoyant at the start of this week’s session however, with GBP/EUR climbing to €1.1251 and GBP/USD steady at $1.3034, while both GBP/AUD and GBP/NZD edge higher, striking AU$1.8074 and NZ$1.9719 respectively. Only GBP/CAD is showing any signs of weakness this morning, with the pairing sliding to C$1.6726 after Canada and the US signed a ‘new version’ of NAFTA.
Looking ahead, the pound may extend its losses this morning as investors brace for another fall in the UK’s manufacturing PMI.
What’s been happening?
The pound limped over the finishing line last week as markets were left unimpressed by the UK’s final second quarter GDP reading.
However it was not Q2 growth that left GBP investors dismayed on Friday, but rather the revision of the UK’s first quarter GDP reading down from 0.2% to 0.1%.
This slide in Sterling sentiment was made worse by the accompanying business investment figures, which revealed investment contracted a further 0.7% in the second quarter as investors were unnerved by growing Brexit uncertainty.
The GBP/EUR exchange rate appeared to be the only major Sterling pairing not to register any notable losses at the end of last week, as the euro came under pressure over concerns about Italy’s new budget
Analysts warned the Italian government’s new deficit targets will likely put Rome on a collision course with Brussels as it exceeds the EU’s 2% limit as well as increasing the risks posed by Italy’s mountain of debt.
Meanwhile this weakness in the euro saw demand for the US dollar accelerate at the end of last week, driving the GBP/USD exchange rate to a new two-week low.
What's coming up?
The downtrend in the pound looks set to continue at the start of this week’s session as markets await the release of the UK’s latest round of PMI figures.
This kicks off with the release of September’s manufacturing survey, with Sterling poised to slide if growth in the UK’s factory sector continued to slow last month.
Meanwhile the euro could strengthen this morning with the publication of the Eurozone’s latest labour figures, with a potential drop in the bloc’s unemployment rate likely to strengthen the single currency.
Finally the US dollar may look to build on Friday’s gains this afternoon when the US publishes its own manufacturing PMI, with economists forecasting another robust expansion in factory activity last month.
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