Confidence in the underlying health of the UK economy weakened
[vc_row][vc_column][vc_column_text]Confidence in the underlying health of the UK economy weakened as November’s services PMI saw a surprise contraction, dragging the pound lower across the board.
However, with German PMIs also falling short, support for the euro also proved limited ahead of the weekend.
Meanwhile, increasing doubt over the likelihood of an imminent US-China trade agreement offered the US dollar a leg up against its rivals, while the revelation that the Reserve Bank of Australia (RBA) seriously considered cutting interest rates at its recent policy meeting saw the Australian dollar fall sharply out of favour.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
UK service sector weakness dents GBP
An unexpected deterioration from the UK services PMI left the pound on a weaker footing ahead of the weekend as worries over the fourth quarter growth outlook mounted.
As forecasts had pointed towards a modest uptick from the PMI investors were caught off guard as the index instead dropped from 50.0 to 48.6.
This deterioration raises the risk of a greater slowdown in the fourth quarter gross domestic product, given that the service sector still accounts for more than three quarters of UK economic activity.
A sharp uptick in government borrowing also put a dampener on GBP exchange rates ahead of the weekend, highlighting the economy’s vulnerability to a deterioration in global fiscal conditions.
Any evidence of an uptick in mortgage approvals could offer the pound a rallying point, however, as higher levels of lending suggest greater consumer confidence.
If consumers appear to shrug off political and economic uncertainty this may encourage bets of greater economic resilience ahead of December’s early general election.
Even so, as investors continue to speculate over the ultimate outcome of the vote the potential for a GBP exchange rate rally still looks limited.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, 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)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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