UK Services Growth at 2 year low

6 October, 2015

Rob Bastin

Going into the first full week of the new month, data comes thick and fast and with it increased volatility should be expected. After Friday’s poor figures for the US, as expected the Euro opened the week strongly and was also boosted by strong Retail Sales figures that came in at 2.3% annual growth compared to forecasts of just 1.8%. The other main announcement for the morning was UK Services PMI, our biggest sector and typically our strongest performing, and after good PMI figures last week markets were optimistic of another improvement to 56. Results however came short of this at just 53.3, still a growth figure as it is over 50 but also the lowest figure seen since April 2013. The poor UK data saw sterling drop against all currencies in the morning but managed to recover these losses against the Euro in particular during the afternoon session. The slowdown in growth is something that is being seen globally at present and is having a knock on impact on central banks abilities to raise interest rates as soon as first planned. It still seems that the US are leading the way with the UK likely to be just behind them, and we may get more insight into this at the Bank of England meeting this Thursday.

The afternoon provided Services and Non-Manufacturing PMI for the US, both of which marginally missed expectations with a slower rate of growth although the dollar found itself in a surprisingly strong position as the day developed, making gains against both the Euro and the Pound by close of business. Overnight we have had an interest rate decision from the RBA with rates held at 2% as expected and this saw strength in the Aussie Dollar following the announcement with gains of around 2 cents against the pound.

With no UK figures today we could have some relief from recent losses ahead of tomorrow Manufacturing & Industrial Production data. Mario Draghi gives a speech this evening at 6pm but otherwise the UK session is quiet for releases with the calendar filling up again for the rest of the week. For those of you who don’t fancy gambling the risks that lie ahead, today could be a good day to secure your currency, particularly for Euro buyers.