Pound extends losses on abysmal services PMI print

The GBP selling bias remained firmly in place on Friday after data showed a worrying slump in UK business activity.

Sterling is mostly rangebound at the start of this week, with GBP/EUR flat at €1.1497 and GBP/USD stable at $1.2238. GBP/CAD is trading sideways at CA$1.6505, while GBP/AUD and GBP/NZD tick up to AU$1.9056 and NZ$2.0578, respectively.

Coming up, will another slump in German business morale pull the euro lower at the start of this week?

What’s been happening?

The pound limped over the finishing line last week. Following on from Thursday’s selloff in the wake of the Bank of England’s (BoE) decision to pause its interest rate hikes, Sterling slumped to new multi-month lows on the back of some dismal UK data.

Sterling’s slump was primarily driven by the UK’s latest services PMI. September’s preliminary figures reported UK services activity plunged to its worst levels since the start of 2021.

Combined with some weaker-than-expected retail sales figures, this stoked UK recession fears and sapped Sterling sentiment.

Meanwhile, the euro was left to trade sideways on Friday in response to the Eurozone’s own PMIs as they made for mixed reading.

At the same time, the US dollar was pulled in two directions at the end of last week’s session as while a cautious market mood prevailed, USD demand was sapped by a bout of profit taking and a weaker-than-expected services PMI.

What’s coming up?

The highly of today’s data calendar will be the publication of Germany’s latest IFO business climate indicator.

September’s index could pull the euro lower this morning, if it reports business morale in the Eurozone’s largest economy deteriorated for the fifth consecutive month.

In the UK, the Confederation of British Industry (CBI) will release is latest distributive trade index later this morning. Will another contraction in UK retail activity apply fresh pressure to the Pound?

Finally, in the absence of any US data of note, movement in the US dollar may be tied to risk sentiment. Expect to see USD exchange rates strengthen if a bearish market mood prevails.