Pound tumbles
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Pound tumbles as UK service sector growth slumps to 40-month low
The pound slumped at the end of last week as markets were left disappointed by the UK’s latest PMI figures.
Sterling is recouping some of its losses at start this week however, with GBP/EUR ticking up to €1.1673, GBP/USD climbing to $1.2870, and GBP/CAD buoyed at C$1.7101. GBP/AUD and GBP/NZD are holding steady at AU$1.8940 and NZ$2.0042 respectively.
Looking ahead we expect UK politics to be centre stage this week as markets react to the recently-published Conservative election manifesto.
What’s been happening?
The pound tumbled at the end of last week’s session in response to some gloomy PMI figures.
GBP investors were shaken by a shock contraction in the UK’s service sector in November, with the sector registering its worst growth since July 2016.
Given the service sector makes up roughly 80% of the UK’s total economic output, markets feared this could indicate that domestic GDP shrank in the fourth quarter.
The euro was also undermined by a gloomy PMI release on Friday, as a modest improvement in the Eurozone’s manufacturing sector was not enough to prevent private sector growth in the bloc from stagnating this month.
Also pressuring the single currency was Christine Lagarde first public speech as President of the European Central Bank (ECB), with EUR investors disappointed she wasn’t bolder in pushing Eurozone countries to introduce fiscal stimulus.
Meanwhile, the US dollar closed out the week on a high, buoyed by both the weakness of its peers and a stronger-than-expected pick-up in US consumer sentiment in November.
What’s coming up?
The recently-published Conservative election manifesto will be in focus for GBP investors this week.
In 2017 the Tory’s manifesto proved to be deeply unpopular with the electorate and resulted in the party shedding the significant lead it held over Labour in the polls at the time.
GBP investors will be hoping that there won’t be a similar response to the Tory’s policy plans this time around, as slump in Conservative polling figures is likely to reflect poorly on the pound.
For EUR investors the focus this week will be on the latest Eurozone CPI figures, with the euro likely to face some headwinds at the end of the session if inflation continued to languish below 1% in November.
Finally, the US dollar could come under some pressure mid-week with the release of the latest US durable goods order figures, with economists forecasting orders growth will have slumped for a second month in October.[/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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