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Pound rallies as UK service sector avoids contraction in December

currency-newsPound rallies as UK service sector avoids contraction in December
The pound strengthened on Monday as growth in the UK service sector was revised higher in December.

Sterling appears to be consolidating these gains this morning, with GBP/EUR flat at €1.1766, GBP/USD muted at $1.3152, and both GBP/CAD and GBP/NZD holding steady at C$1.7067 and NZ$1.9758 respectively. Only GBP/AUD is showing any notable movement so far, with the pairing rising to AU$1.9053.

Coming up this morning we have the publication of the Eurozone’s latest CPI figures. An increase in inflation could support the euro today.

What’s been happening?

The pound got off to a strong start this week, rallying on the back of a stronger-than-expected final services PMI reading in December.

The revised figure saw the services index adjusted from 49.0 to 50.0, resulting in the UK’s all-important service sector narrowly avoiding contraction last month.

The upwardly revised figure came on the back of increased optimism in the second half of December following the conclusion of the UK general election.

The euro also accelerated on Monday, supported by some upbeat Eurozone economic data.

This included Germany’s latest retail sales figures, which saw sales growth soar from -1.3% to 2.1% in November, as well as the Eurozone’s own services PMI, which was also revised higher in its final reading for December.

Meanwhile, the US dollar was left on the defensive yesterday amid concerns of a possible conflict between the US and Iran.

What’s coming up?

Looking ahead, the euro is likely to be in focus this morning with the publication of the Eurozone’s consumer price index.

Economists forecast this will show that inflation in the bloc accelerated from 1% to 1.3% in December.

While EUR investors will welcome the uptick in inflation, it may only provide limited support to the single currency this morning.

Meanwhile, the US dollar may tick higher this afternoon with the publication of the ISM non-manufacturing PMI as analysts predict it will reveal the US service sector expanded last week.

Finally, in the absence of any economic data, the focus for GBP investors will turn back to Brexit today as MPs return to Westminster to resume their scrutiny of Boris Johnson’s withdrawal deal. 
 
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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