Pound weakens, has sluggish PMI data killed off any chance of a rate rise?

Philip McHugh May 4th 2018 - 2 minute read

The pound was placed on the back foot again yesterday as a disappointing services PMI weighed heavily on Sterling sentiment.

Sterling remains subdued this morning, with GBP/EUR holding steady at €1.1330 and GBP/USD trading narrowly at $1.3566 while GBP/AUD and GBP/CAD are both muted at AU$1.8117 and C$1.7490 respectively.

Only GBP/NZD appears to be showing any signs of life today as it rises to NZ$1.9330.

The US will publish its latest payroll figures later this afternoon, with the US dollar likely to press higher if they print as robustly as forecast…

What’s been happening?

The pound found itself sliding against most of its peers again on Thursday as the UK’s latest service PMI printed lower than expected.

The disappointing result capped off a trio of fairly lacklustre PMI figures, with analysts warning April’s data points to the UK economy only expanding by 0.2% in the second quarter.

The lacklustre performance of the UK’s key service sector was also seen as the final nail in the coffin for a rate hike from the Bank of England (BoE) next week, further pressuring the Sterling exchange rate.

While the GBP/EUR exchange rate fell back again yesterday, the pairing’s losses were trimmed somewhat by the release of the Eurozone’s latest inflation figures.

Data published by Eurostat revealed the bloc’s headline inflation rate unexpectedly slipped from 1.3% to 1.2% in April, pulling it further away from the European Central Bank’s (ECB) target rate of 2% and capping the euro’s gains.

Meanwhile, the GBP/USD exchange rate remained on the defensive for much of Thursday’s session but was prevented from sustaining any significant losses as US service sector output was shown to have slowed faster-than-expected in April.

What’s coming up?

A lull in notable data may leave the pound vulnerable to further losses during Friday’s session, especially if markets continue to reflect on April’s poor PMI figures.

The euro looks on track to strengthen during today’s session following the publication of the Eurozone’s latest retail sales, with sales growth forecast to finally picked up in March after disappointing for three consecutive months.

Meanwhile, the release of the latest US payroll figures is likely to be the most impactful data release today, with the US dollar expected to soar if payrolls jump in line with market forecasts.

Written by
Philip McHugh

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