Services PMI Day

As the US markets re-opened after the extended close for Independence Day celebrations, the markets remained fairly flat.

The data releases throughout the day were littered with various services PMI figures from the UK and throughout Europe as well as the EU figure as a whole. All posted better than expected apart from the UK, which still posted a decent growth figure at 53.4 (anything above 50 shows growth in the sector). Having taken an initial dip against both the single currency and the US dollar, over the rest of the day it managed to correct itself, pushing up towards the top of or current GBP/EUR range and moving a bit closer back towards the significant resistance level of 1.3 on the dollar.

We are in a situation where the pound has little strength behind it and the euro is reacting positively to global political concerns and its domestic data releases which have slowly been improving. The sentiment lies with the single currency because of the recent chat by the European Central Bank that monetary stimulus may get wound down as the inflationary pressures ease and other factors are looking more positive. With this in the back ground, sentiment is likely to stay with the euro and those hoping for the rates to make returns to the post referendum levels of 1.2 versus the pound, should probably re-evaluate their expectations.

The dollar has been out of favour for some weeks now despite the expectations of another couple of interest rate rises this year still to come, but with the possibility of both the EU and the UK raising rates too, this is less significant and investors are much more interested in whether these other economic areas raise and who will pull the trigger first. The ECB’s next meeting is on the 20th of this month, whilst the Bank of England’s is not until the 2nd August, meaning investors are looking towards the EU first. The ECB have revised down their inflation outlook, while some members of the Monetary Policy Committee have been openly vocal this week about the fact the UK should prepare themselves for interest rates to rise.

The pound is already on the slide this morning, down nearly half a euro cent despite German factory orders coming in under expectations. Another example of gains being made one day and lost the next. The day is fairly quiet for data with the main pointers being speeches by the ECB member Peter Praet followed by President Trump speaking shortly after at midday. The afternoon is a little heavier with plenty of North American figures in the shape of jobless claims, trade balance, services PMI and some Fed member speeches, plus for any Loonie buyers out there, Canadian building permits and import/export figures come out after lunch.

More sentiment led trading no doubt with the pound on the back foot already so for those looking to make an exchange in the coming days or weeks, as always in recently, our guidance would err towards looking at securing something sooner rather than later. Give one of the team a call today to discuss your options available to maximise your exchange on 01923 725 725.