The US dollar’s rise has also put additional pressure on sterling and the euro ahead of monetary policy decisions from both the Bank of England and European Central Bank. The pound may endure another difficult period if UK services data misses expectations. Meanwhile, volatility for the euro is also likely with President Mario Draghi probable to give markets plenty of policy and currency guidance in his press conference that follows the ECB’s interest rate decision.
Sterling
The pound has made a weak start in front of services data and Bank of England monetary policy decision, reflecting concerns that fragile business activity may strengthen the case for more central bank stimulus. There is a chance that worrying economic data will stimulate a more dovish approach amongst the Monetary Policy Committee with three of its nine members already calling for an additional £25bn of quantitative easing. Growth in Britain’s dominant services industry is forecast to have slowed slightly from 51.8 to 51.5 according to PMI survey.
US dollar
The greenback could add to its latest rally in the session ahead if traders take a dim view of services data from the UK followed by central bank policy decisions from both the Bank of England and European Central Bank. However, the US currency’s upside may be limited ahead of US non-farm payrolls and unemployment data, figures that are now central to the Federal Reserve’s open-ended stimulus programme. The US dollar’s surge also masks its poor performance in North American session which came after data showed the US services sector slowed in March at a quicker pace than investors had expected.
Euro
The euro is already stuck near the bottom end of its recent trading ranges but could face an even more difficult short-term outlook if Draghi indicates the ECB may have to activate some form of stimulus amid signs that recession in euro area economy has worsened. The single currency has endured a high level of volatility in recent weeks as Cyprus struggled to agree terms on a bailout with its international lenders; a deal that become stuck on the issue of swiping bank deposits to make-up a short-fall of about €6bn. Draghi will be speaking after thee no changes to the central bank’s main interest rate.