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Pound steady despite UK service sector slump

business-articlesPound steady despite UK service sector slump
  • Slump in UK service sector fails to trigger pound losses
  • Growing evidence of Eurozone slowdown undermines euro 
  • US dollar slips as hopes of US stimulus dent safe-haven demand 
 
 
Pound shakes off PMI weakness
 
A sharp deterioration in March’s provisional UK services PMI highlighted the significant impact that the Covid-19 crisis has already had on economic activity.
 
However, the slump in the index from 53.2 to just 35.7 was not enough to push the pound lower against its rivals yesterday.
 
After a protracted run of weakness GBP exchange rates appeared to find a bottom on Tuesday, with the currency bouncing back slightly in spite of lingering worries over the UK outlook.
 
With forecasts pointing towards a softening in the headline UK consumer price index, though, the pound may struggle to hold onto its positive footing.
 
 
Eurozone slowdown fears weigh on euro
 
Confidence in the underlying health of the Eurozone economy continued to deteriorate with the release of March’s raft of manufacturing and services PMIs.
 
With activity across the currency union showing a sharp slowdown demand for the euro naturally softened.
 
Confirmation that the German IFO business sentiment index weakened could give the single currency a further push lower.
 
Unless markets see reason to bet on the Eurozone economy seeing a rapid recovery from its imminent recession EUR exchange rates look set to remain biased to the downside.
 
 
US dollar dips as risk appetite improves 
 
As safe-haven demand eased slightly in response to hopes of a US fiscal stimulus package, the US dollar fell out of favour.
 
Signs of weakness in the latest US PMIs also put a dampener on USD exchange rates yesterday, with the world’s largest economy looking set to slow sharply.
 
With February’s durable goods orders figure expected to show another monthly contraction the potential for US dollar gains may prove limited this afternoon.
 
That being said, any fresh bout of market anxiety could quickly send USD exchange rates higher again. 
 
 
Upcoming Data:
 
Wednesday, 25th March 2020

09:00 EUR Germany IFO Business Sentiment Index
09:30 GBP Consumer Price Index
12:30 USD Durable Goods Orders
 
 
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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