Services Sector Decline a Blow to the Pound

Sterling ended last week on the back foot as Markit services PMI showed a larger than expected drop. The UK economy is largely reliant on its services sector, so this decline came as a blow to the pound.

Sterling fell sharply against all its major counterparties, including over half a cent against the single currency and three-quarters against the dollar. The EU retail sales came under forecast also, but investor sentiment was away from the pound with the undercurrent of Brexit still harming confidence.

As the US markets opened there was a slight recovery but with mixed jobs data, non-farm payrolls posting a bigger than expected number at 227,000, way above the expected 175,000, but average earnings below forecasts and the overall unemployment rate also above expectations. The GBP/USD rates remained volatile over the rest of trade although moving within a half cent range. The real winner was the euro, which gained further against sterling and nearly a cent against the dollar.

Another big winner on Friday was the South African Rand, which being a commodity based currency, is strongly affected by the US dollar. With the weak data and pressure coming from the Trump effect, the Rand gained 2 percent against sterling following the US jobs data.

The week ahead has the following which will affect market movement so take note and contact one of the CI team for a friendly chat on the options available to secure your currency requirement and protect yourself from adverse movement.
Monday – US labour market conditions index
Tuesday – British Retail Consortium retail sales, AUD interest rate decision and policy statement, US trade balance, Canadian PMI
Wednesday – New Zealand interest rate decision and policy statement
Thursday – Swiss unemployment, German trade balance, US jobless claims, Canadian house build data
Friday – AUD RBA monetary policy statement, EU extraordinary economic summit, UK manufacturing and industrial production plus trade balance, Canadian unemployment, NIESR UK GDP estimate