January’s sharp monthly rebound in UK retail sales was not enough to keep the pound from coming under fresh pressure yesterday.
- Underwhelming UK services PMI leaves GBP drifting
- Signs point towards soft Eurozone inflation
- Narrowed trade deficit fails to benefit Canadian dollar
Demand for the pound weakened on Tuesday in spite of October’s UK services PMI bettering expectations, showing a modest uptick from 49.5 to 50.0.
As the index demonstrated that the service sector stagnated at the start of the fourth quarter this raised fresh concerns over the strength of the economic outlook.
With the sector looking set to remain under pressure in the months ahead thanks to the lingering uncertainty of Brexit, GBP exchange rates were left on the back foot.
The intensifying campaign for December’s general election could put additional pressure on the pound today as political jitters persist.
Stronger Eurozone retail sales to limit euro downside
A sharp decline in September’s Eurozone producer price index saw the euro fall out of favour yesterday, with signs still pointing towards weaker inflation.
However, the single currency may find a rallying point this morning if Eurozone retail sales show an improvement in September.
Evidence of resilient consumer spending could help to ease anxiety over the strength of the currency union, at least in the short term.
On the other hand, a slowdown in sales growth could see the euro extending its losses.
US dollar jumps as services PMI rebounds
US dollar exchange rates broadly strengthened yesterday as the ISM non-manufacturing PMI revealed that growth in the US service sector rebounded at a faster-than-expected pace in October.
Today USD investors will be watching a series of speeches by Federal Reserve policymakers.
Cautious commentary could undo some of the US dollar’s recent gains.