Stagnant trading for Sterling exchange rates

Yesterday saw a continuation of the flat trading that has been experienced in recent weeks for Sterling markets. There were a few minor UK data releases in the morning, with the focus on the latest PMI figures for the services sector. This sector contributes the largest portion of our overall GDP, and so carries more weight that manufacturing and construction. December’s result posted another growth figure at 54.2, marginally better than the expected 53.8 but not significant enough to cause any impact on Sterling exchange rates. The afternoon did provide some released from across the pond, namely ADP employment change which saw a strong figure of 250k, up from 185k previously. Services PMI for the US also came in higher than expected at 53.7 against forecasts of 52.4.

With Sterling trading very flat itself, it has been the strength in the EUR/USD pair that has caused any fluctuation in GBP/EUR and GBP/USD. EUR/USD is at a 3 year high and up 2 cents since Xmas. The stronger Euro is weighing on GBP/EUR exchange rates with gradual losses of the same amount over the last month, whilst GBP/USD has gained 2 cents in the same time due the weaker US Dollar. GBP/EUR rates remain very much range bound with current levels moving back towards the bottom end of this recent range.

The day ahead has potential to busy the most volatile day seen so far this year as we await US Non-Farm Payrolls at 1:30pm. As seen in recent days, the effect of EUR/USD is significant on both GBP/EUR and GBP/USD and so this announcement has potential for some much shaper moves than have been seen of late. Euro-zone inflation is also to be releases at 10am but no data for the UK.