Pound plucky despite service sector slowdown

A report about the strength of the UK’s services sector may have provided little cause for cheer on Tuesday but that didn’t stop the pound advancing on several of the other major currencies.

The GBP/EUR exchange rate is currently trading in the region of €1.0919 (up from yesterday’s low of €1.0857), GBP/USD has advanced from $1.2918 to $1.3043, GBP/AUD has improved from AU$1.6195 to AU$1.6334, GBP/NZD is fluctuating between NZ$1.7933 and NZ$1.8042 and GBP/CAD rallied to C$1.6162 from C$1.6020.

Keep reading to find out what you can expect from the currency market today…

What’s been happening?

There’s no getting away from the fact that yesterday’s UK services PMI was hardly impressive.

The index of service sector output slumped from 53.8 to 53.2 – an 11-month low.

Markit economist Chris Williamson said of the report; ‘A summer slowdown was evident in the economy as the August PMI surveys showed slower rates of expansion in services and construction offsetting an improved performance in the manufacturing sector. The resulting overall expansion was the weakest for six months. Although the latest two months’ data put the economy on course for another 0.3% expansion in the third quarter, momentum is being gradually lost.’

He added that optimism is fading as a result of Brexit uncertainty.

Despite this, the pound had a pretty good day, shrugging off the services release and registering daily gains against currencies like the euro, US dollar and Canadian dollar.

During the Australasian session poor Aussie growth figures weakened AUD exchange rates, meaning GBP/AUD began Wednesday in a stronger position.

What's coming up?

UK data releases are lacking today, so any Brexit-related reports are likely to be the main cause of GBP exchange rate movement.

The GBP/EUR exchange rate may also respond to retail PMIs for Germany and the Eurozone.

GBP/USD, on the other hand, may give up some of its recent gains if this afternoon’s US ISM services/non-manufacturing PMI impresses.

As it stands, the index is expected to climb from 53.9 to 55.5.

We also have the Bank of Canada (BOC) interest rate decision to look out for.

If the BOC is feeling in a positive mood after last week’s upbeat domestic growth figures, the odds of further interest rate hikes will increase and Canadian dollar exchange rates are likely to climb.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.