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Sterling bounces back on service sector strength

currency-newsSterling bounces back on service sector strength
Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

GBP/EUR surged from €1.1645 to €1.1717, GBP/USD rebounded from $1.2439 to $1.2499 and GBP/AUD jumped from AU$1.6403 to AU$1.6539.

GBP/NZD, meanwhile, struck its best levels of 2017 by advancing from NZ$1.7821 to NZ$1.7952.
Scroll down to find out what news could be rocking the currency market today…

What’s been happening?  

Yesterday’s pound gains were almost entirely driven by the UK’s services PMI from Markit.

As the services sector accounts for over 70% of total economic growth, the news that the index edged up from 53.3 to 55.0 in March was enough to send GBP exchange rates higher.

This was the strongest rise in service sector activity of the year so far, prompting this response from Duncan Brock of the Chartered Institute of Procurement & Supply; ‘Taking March in isolation, the service sector defied the slowdown experienced by construction and manufacturing firms. A stronger end to the first quarter from the biggest contributor to UK GDP will provide some relief to the UK economy as a whole, shaken and stirred by continuing highs and lows since the Brexit vote.’

The report was good enough to counteract the impact of Bank of England policymaker Gertjan Vlieghe asserting that there’s no need for UK interest rates to be increased anytime soon and the pound managed to hold gains overnight.

What’s coming up?

There isn’t much happening in the UK today, so the currency market is more likely to be moved by developments in the Eurozone and US.

Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.

Any references to the future path of monetary policy from ECB President Mario Draghi, Vice President Vítor Constâncio or Executive Board Member Peter Praet could inspire notable euro movement.

If the officials indicate that policy is unlikely to be adjusted for the foreseeable future, GBP/EUR could potentially advance to its best levels of the week so far.

However, any hints that either the central bank’s quantitative easing scheme could be tapered or that interest rates could rise sooner than expected would help EUR exchange rates climb before the weekend.

Over in the US we’ve got initial jobless claims and continuing claims numbers. Yesterday’s US employment report smashed forecasts and more positive jobs figures would lend the US dollar support ahead of tomorrow’s influential non-farm payrolls data.

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.
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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