Sterling drops after more poor UK data

6 February, 2018

Rob Bastin

The new week kicked off yesterday with more pressure on Sterling, continuing the trend February so far. Last week UK PMI figures for the Manufacturing and Construction sectors both came in worse than expected, with Construction only marginally avoiding a contraction in the sector. Yesterday we had the 3rd and largest sector for the UK with Services PMI figures for January coming in at a disappointing 53, down from 54.2 previously and lower than forecast. These figures all point to a potential slow down in growth for the first quarter of 2018 and saw the pound drop against all major currencies, losing over half a cent against the Euro and 1.5 cents against the US Dollar. GBP/EUR now tests a key support level that could see a further 2 cent drop should it give way this week.

Elsewhere yesterday there was also data out from the Euro-zone as well as the US. Euro-zone data was mixed with Services PMI coming in strong at 58. Up from 57.6, but Retail Sales were slightly lower than forecast. US Non-manufacturing PMI was significantly higher than forecast at 59.9, up from 56 previously and this aided the greenbacks recovery against both the Pound and the single currency during yesterdays trading.

The coming days are very quiet on the calendar which leaves the pound very exposed following a string of weaker data in recent days. The Bank of England meet on Thursday and this will likely be the highlight of the week for the pound, for better or worse. There is still plenty of uncertainty surrounding the pound as the next round of Brexit negotiations begin in the coming months where crucial trade deals will finally be tackled. Recent movements in exchange rates really underline the importance of acting on any better days as peak buying opportunities are often very short lived in an uncertain market. Contact your broker today and ask about our LIMIT orders that can help you take advantage of such peaks.