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Pound slides as UK service sector stagnates

business-articlesPound slides as UK service sector stagnates
  • Disappointing UK services PMI dents pound
  • Euro softens as ECB fails to gain hawkish president
  • Widened trade surplus shores up Australian dollar
 
 Anxiety over UK growth outlook drags on pound
 
After June’s UK services PMI disappointed forecasts, sliding to just 50.1 and barely avoiding stagnation, the pound fell further out of favour with investors.
 
With the odds of a weak second quarter gross domestic product reading rising GBP exchange rates were left on the back foot, driven by fears that a technical recession could follow.
 
As Brexit-based uncertainty looks set to cast a shadow over the UK economy for the foreseeable future the potential for a pound rally appears limited.
 
The latest developments in the ongoing Conservative leadership contest could provoke further volatility for GBP exchange rates today, however.
 
 
Euro looks for boost on Eurozone retail sales growth
 
A solid raft of Eurozone services PMIs were not enough to lift the euro yesterday, with investors still concerned by the weaker nature of the manufacturing sector.
 
Markets were also disappointed that Mario Draghi’s successor as head of the European Central Bank (ECB) will not be a more hawkish policymaker.
 
Even so, the mood towards the euro could improve this morning if May’s Eurozone retail sales data shows an increase in consumer spending.
 
Signs that consumers are taking a more optimistic view, in spite of global trade tensions, may encourage bets of a stronger second quarter economic performance.
 
 
Australian dollar vulnerable to construction sector contraction
 
Yesterday’s unexpectedly strong Australian trade surplus figure offered a boost to the Australian dollar.
 
An uptick in building approvals also helped encourage AUD exchange rate gains, suggesting a greater level of resilience within the domestic economy.
 
However, the appeal of the Australian dollar could diminish once again this evening if June’s construction PMI remains firmly situated within contraction territory.
 
As long as the construction sector remains in a state of decline any support for the Australian dollar could prove short-lived.
 
 
Upcoming Data:
 
Thursday, 4th July 2019
10:00 EUR Eurozone Retail Sales
23:30 AUD Construction PMI
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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