US AM Digest: GBP Outperforms After PMI, Oil Slips as the US Pressure OPEC to Raise Production

US Market Snapshot via IG: DJIA 0.01%, Nasdaq 100 0.2%, S&P 500 0.01%

Major Headlines

• RBA maintains interest rate at 1.5%, sticks to neutral stance
• US is said to have asked OPEC to raise oil production
• UK Services PMI reaches best level since December

GBP: The Pound is the best performer in the G10 FX space, following today’s Services PMI report, which beat forecasts, having risen to its highest level since December. This rounded off a run of better than expected PMI releases, which points to a rebound in Q2 growth from the dismal Q1 reading. As such, BoE rate hike expectations have pushed up slightly, with an August rate hike seen at just under 40%. However, GBPUSD has failed to break above 1.3400 and is now back down to 1.3350 support zone. Eyes on BoE’s Ramsden who could provide the spark to propel GBP higher.

CAD, MXN: NAFTA currencies are underperforming amid concerns over a NAFTA agreement, particularly after Mexico imposed retaliatory tariffs on US imports. Additionally, both the CAD and MXN saw a bout of volatility after reports that Trump is considering bilateral talks in order to speed up NAFTA discussions.

AUD: From Hero to Zero, the Australian Dollar is the worst performer after the RBA maintain its neutral stance at its latest monetary policy meeting, with the central bank showing no signs of a near-term rate move. Elsewhere, current balance data saw a wider deficit than expected which has kept AUD offered with the pair back down towards the 0.7600 handle.

Crude Oil: Brent crude futures has suffered losses of over 1% this morning amid reports that the US is said to have asked OPEC to raise oil production. As such, this has raised the likelihood that the cartel will go ahead and ease production curbs at the June 22-23 meeting, which in turn has weighed on prices.

DailyFX Economic Calendar: Tuesday, June 5, 2018 – North American Releases

DailyWebinar Calendar: Tuesday, June 5, 2018

IG Client Sentiment Index: GBPUSD Chart of the Day

GBPUSD: Data shows 72.0% of traders are net-long with the ratio of traders long to short at 2.58 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.42353; price has moved 6.1% lower since then. The number of traders net-long is 5.6% higher than yesterday and 9.8% higher from last week, while the number of traders net-short is 2.5% lower than yesterday and 6.1% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias.

Five Things Traders are Reading

1. “DXY Index Turns Higher on Back of Mixed European PMIs” by Christopher Vecchio, CFA, Sr. Currency Strategist
2. “
   Trading Outlook for US & UK Crude Oil, Gold Price, S&P 500 & More”
   by Paul Robinson , Market Analyst
3. “Risk Appetite Revives, But Only Modestly | Webinar”by Martin Essex, MSTA , Analyst and Editor
4. “Gold Price Continues to Battle the Downtrend; G7 Ahead” by Nick Cawley, Market Analyst
5. “GBPUSD Cheers Hat-trick of PMI Surveys Signaling UK GDP Rebound” by Justin McQueen, Market Analyst

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.comFollow Justin on Twitter @JMcQueenFX