The foreign exchange market is becalmed, leaving the US dollar narrowly mixed. The euro has been confined to less than a 20-pip range through the Asian session and most of the European morning. The news stream is light. The US withdrawal from the Paris Accord may have garnered the headlines, but as a market force, it is difficult to detect the immediate impact. Â
The UK reported stronger than expected construction PMI. Unlike the manufacturing PMI reported earlier in the week, where the decline was not as much as anticipated, the construction PMI rose outright. The 56.0 reading is a new two-year high and compares with April’s 53.1. An interesting insight into this smallest of the three surveys is that the higher prices from sterling’s past depreciation appear to be fading as input prices rose by their least in seven months. Â
The economic news in the UK is playing second fiddle to the politics. More polls will be released over the weekend. Net-net since the election was called, the Tories support in a poll of polls is little changed. The tightening of the polls seems to reflect a gain in Labour’s support at the expense of the Lib Dems and UKIP. Although we have pointed out developments in the options market that show at least some investors are buying downside protection, we remain surprised by the stability of sterling. At $1.2860, it is up 0.4% on the week. It fell about 0.5% in the month of May. Â
Sterling had been sold to near $1.2770 in the middle of the week before recovering to post an outside up day. It has spent yesterday and today within the mid-week range. A break of the $1.2820-$1.2920 range could spur a cent move. Note the euro is flat against sterling this week. If this is sustained, a five-week advancing streak for the euro will have been snapped. Â
Stocks and bonds are firmer today. The S&P 500 and Dow Jones Industrials finished yesterday at a record high. Asian equities followed suit.  The MSCI Asia Pacific Index gained nearly 1%. It was practically flat on the week coming into today. It is at its best level since 2015. The Nikkei closed above 20k for the first time since August 2015. Korea’s Kospi is at new record highs despite the elevated tensions on the peninsula Â
