The Dollar is slightly stronger across the board, helped in part by yesterday’s release of stronger-than-expected US PMI data, market concerns that major developed central banks are turning more dovish and the ongoing Brexit saga’s impact on Sterling.
In trade-weighted terms the Dollar is up about 0.2% today but remains well within its narrow year-to-date range. The ISM manufacturing PMI rose to a better-than-expected 55.3 in March (from 54.2 in February) fuelling hopes that US GDP growth may have stabilised in Q1 2019 after having fallen to 2.2% qoq annualised in Q4 2018 from a multi-year high of 4.1% in Q2.
The Dollar managed to rally 0.8% versus the Australian Dollar with the AUD/USD cross down to 0.705 – the bottom end of a two-week range – despite an ultimately neutral Reserve Bank of Australia policy meeting. While the RBA painted a reasonably balanced picture of the Australian economy markets are seemingly nervous that the RBA will ultimately follow the RBNZ’s lead in adopting a more dovish stance. There has also been little respite for the Euro, with the EUR/USD cross trading below 1.12 for the first time since 7th March.
GBP/USD continues to ebb and flow around its current level (1.307) as markets and analysts try to make sense of an increasingly opaque and uncertain Brexit outlook. The House of Commons yesterday once again failed to give its majority support to any Plan B, although indicative votes on membership of a customs union, a Norway-style deal and a second referendum were only narrowly defeated. Prime Minister May is reportedly debating whether to ask parliament to vote for a fourth consecutive time on her draft Brexit deal.
If neither plan obtains a parliamentary majority, the legal default position is that the UK will exit the EU without a deal on 12th April, which would in turn put Prime Minister May under pressure to seek from the EU yet another but this far longer extension to Article 50 – a scenario which would do little to quell near-term uncertainty.
