Pound Sterling Looks to Service Sector PMI
UK construction activity grew at its slowest pace for 11 months in July, it was reported yesterday. The PMI dipped unexpectedly from 54.8 in June to 51.9 in July as commercial building work faltered due to client concerns over Britain’s economic outlook and elevated levels of political uncertainty.
The downbeat report painted a different story to Tuesday’s impressive manufacturing figures, but had less of an impact on Sterling trading, as factory output accounts for around 10% of GDP, while construction makes up around 6%.
The Pound is liable to trade with greater sensitivity to this morning’s UK services report, which accounts for over 75% of the British economy. The result is expected to print at 53.6, only slightly higher than June’s score of 53.4. However, any surprises, upward or downward, could have a reciprocal impact on demand for Sterling.
Pound to Euro Exchange Rate Softens Ahead of Bank of England Interest Rate Announcement
The Pound to Euro exchange rate softened slightly yesterday but larger moves are expected during today’s session.
First we have the highly influential UK service sector PMI to contend with, and then we have the Bank of England’s August monetary policy announcement. The BoE is widely expected to leave rates on hold at 0.25% and refrain from altering the asset purchasing target of £435 billion.
However, Governor Mark Carney’s press conference and the bank’s quarterly inflation report will be scrutinised for clues on future policy.
The market expects a vote of 6-2 against raising rates in August, meaning that GBP/EUR could pop if more than two policymakers vote for a hike this time out.
The Pound could also benefit from a hawkish message from Governor Carney, even if the vote remains 6-2. On the other hand a wider margin of victory for the doves could send GBP/EUR skidding to multi-month lows, as could a cautious message from Carney.
Pound to US Dollar Exchange Rate Hits Another New 10-Month High
‘Cable’ rose to a fresh 10-month high yesterday as demand for the US Dollar continued to be adversely affected by the political turmoil in Washington DC. US President Donald Trump has lost the trust of markets following a range of scandals, ranging from high profile firings of cabinet members to alleged Russian collusion during his election campaign.
The Pound can expect to register further gains today if the UK services PMI prints positively and the BoE policy announcement features enough of a hawkish message for traders to get excited.
However, Sterling could begin giving back its recent gains to the ‘Greenback’ if the private sector report disappoints and the UK central bank employs dovish rhetoric.
Pound to Canadian Dollar Exchange Rate Rises to 3-Week High
The Pound to Canadian Dollar exchange rate drifted higher through yesterday’s session to strike its highest level for three weeks. The commodity-correlated ‘Loonie’ was impacted by a report showing that US crude stocks fell by -1.53 million barrels last week, which was less than the forecast fall of -2.52 million barrels. The numbers dragged on demand for crude, which subsequently softened the appeal of the Canadian Dollar.
Pound to Australian Dollar Exchange Rate Touches 2-Week High
The Pound touched a new two-week high versus the Australian Dollar yesterday, however, the ‘Aussie’ proved resilient and clawed back its losses by the close of play in London.
The Antipodean currency received a body blow earlier in the week when Reserve Bank of Australia Governor Philip Lowe commented on the problems of a strong domestic currency, but traders appear reluctant to drive the ‘Aussie’ significantly lower due to expectations that the RBA may yet raise interest rates in the foreseeable future.
Pound to New Zealand Dollar Exchange Rate Rallies 100 Pips
The Pound to New Zealand Dollar exchange rate appreciated by around a cent yesterday following surprisingly soft employment figures in New Zealand. On a quarterly basis, New Zealand employment declined -0.2% in Q2, which was significantly lower than market expectations of +0.7%. The disappointing figure took the yearly employment change result down to 3.1%, having stood at 5.7% in Q1.
Data Released
09:30 GBP Markit/CIPS UK Services PMI (JUL)
10:00 EUR Euro-Zone Retail Sales (YoY) (JUN)
12:00 GBP Bank of England Rate Decision (AUG 03)
12:00 GBP BOE Asset Purchase Target (AUG)
12:00 GBP Bank of England Inflation Report
15:00 USD Factory Orders (JUN)