05/06/2017 - UK Construction Shows Solid Growth in May 

GBP

Data on Friday showed British construction activity grew at its fastest rate since the end of 2015 last month. The Markit construction purchasing managers' index , jumped to 56.0 from 53.1, its highest since December 2015 and above all forecasts.

However the pound was relatively unchanged after the data release. As the focus still remains on political polls that are predicting a wide range of outcomes - from a slim majority for Prime Minister Theresa May's Conservatives to a hung parliament. This has kept investors focused on Britain's election this week. 

World Bank economists yesterday upgraded their forecasts for UK growth over the next three years, supported by accelerating growth in emerging and advanced economies. Against an improving international backdrop, the UK economy is now expected to expand by 1.7 per cent in 2017. This has been revised up from an estimate of 1.2 per cent in January. Annual real GDP growth forecasts for 2018 and 2019 have also been revised up from projections of 1.3 per cent to 1.5 per cent.

USD

The dollar dropped to seven-month lows on Friday after data showed the U.S. economy created fewer jobs than expected last month, which could derail a possible interest rate hike by the Federal Reserve in the second half of this year. Data showed that U.S. non-farm payrolls increased just 138,000 last month as the manufacturing, government and retail sectors lost jobs. The consensus forecast had been 185,000 new jobs.

March and April data was revised to show 66,000 fewer jobs created than previously reported. May's job gains marked a sharp deceleration from the 181,000 monthly average over the past 12 months. Despite the big miss in payrolls, analysts said this would not necessarily prevent the Fed from raising interest rates this month. However the unemployment rate fell to a 16-year low of 4.3 percent.

Key Announcements

09.30 – GBP: Services PMI; Forecast at 55.1 against previous of 55.8

15.00 – USD: ISM Non-Manufacturing PMI; Forecast at 57.3 against a previous of 57.5