Sterling
Sterling soared across the board yesterday morning in response to another better-than-anticipated UK PMI result. Following outperforming private sector reports on manufacturing and construction, August’s service sector PMI leapt from 47.4 to 52.9 in what was the largest monthly increase in the index’s 20-year history.
The upbeat report suggests that the domestic economy is recovering from the shock of ‘Brexit’, which dragged on growth in July. If ecostats continue to print in this vein then it is unlikely that the Bank of England will opt to unleash further stimulus measures before the end of the year – and for this reason the Pound was able to hit a monthly high against the Euro and a seven-week high against the US Dollar yesterday.
Euro
The Pound to Euro exchange rate inched higher by around a quarter of a cent to reach a fresh monthly high yesterday.
Demand for Sterling was boosted by the resilient UK service sector PMI, which massively overshot expectations of 50.0. Demand for the single currency, however, was hurt by a private sector report from the currency bloc showing that Eurozone activity grew at its slowest pace for 19 months in August. The underwhelming print of 52.9 was largely driven by a 15-month low score from Germany – the bloc’s largest economy.
Eurozone retail sales beat the median forecast of 1.8%, with a sturdy score of 2.9%, but it was not enough to prevent Sterling prevailing over the single currency yesterday.
US Dollar
‘Cable’ peaked at a seven-week high yesterday morning in response to the robust British services report, which showed surprisingly strong growth in the sector of the UK economy which accounts for over 70% of domestic product.
The Pound rose by around 70 pips in a knee-jerk reaction to the services print, but ultimately settled with gains of 20 pips on the day. Data this afternoon is anticipated to show that US tertiary output decelerated from 55.5 to 55.0 in August but the report is unlikely to have a material impact on GBP/USD trading patterns unless we are treated to a significant deviation from the forecasts.
Canadian Dollar
Sterling was unable to capitalise on the sturdy British services PMI against the Canadian Dollar yesterday because GBP/CAD traders were preoccupied with events taking place in China. The ‘Loonie’ rallied in response to a leap in oil prices on news that Russian President Vladimir Putin had agreed to cooperate with Saudi Arabian Deputy Crown Prince Mohammed bin Salman to curb output and stabilise prices in the oil market. GBP/CAD tumbled-75 pips in reaction to the news.
Australian Dollar
The Pound to Australian Dollar exchange rate remained flat on the day yesterday as optimism that the Reserve Bank of Australia would not slash rates in September propped up the ‘Aussie’ versus the energised Sterling. The Antipodean currency was also assisted by some upbeat Chinese data, which raised hopes of enhanced cross-border trade between Australia and its largest export market.
New Zealand Dollar
The Pound was unable to register any lasting gains versus the New Zealand Dollar yesterday despite the unexpectedly strong UK services PMI rebound. It seems that a 52.1 print in the Chinese services PMI, which overshot forecasts of 51.7, was enough to improve sentiment towards the high-beta ‘Kiwi’ Dollar.
Data Released
EUR Euro-Zone Gross Domestic Product s.a. (YoY) (2Q F) Medium 1.6%
USD ISM Non-Manufacutring Composite (AUG) High 55