So far it’s been a tough week for the Great British Pound. Each day has produced a concerning PMI print, with Wednesday continuing the worrisome trend. This time it was the services sector which provided the GBP bears with ammunition. The sector is the most important in the UK economic make-up and comprises around 75% of GDP. In respect to PMIs, the 50 mark is the threshold which defines contraction and expansion. May’s reading was 51.0 with June’s report expected to match this. The number printed to the downside at 50.2. This still displays a modicum of expansion but its close proximity to the 50 threshold is a big cause for concern.
The pound dipped following the release. Short term support held against the buck at $1.2550 while the same goes for the €1.1110 mark against the single currency. Markets have begun pricing in the prospect for a 2019 rate cut from the Bank of England, which currently stands at a 50% probability. Although, similar with the Fed’s projection for cuts, this probability seems a little overcooked! However, one can’t shy away from the exceptionally worrying state of affairs for the UK economy, both business and the consumer are craving certainty while we are still waiting to confirm our next prime minister, neither of which candidate, many would agree, appear ideal!
Today is expected to be a quiet trading session with the US absent from the market as they observe the 4th July national holiday. The only events of note include eurozone retail sales mixed with 2 speeches from ECB members. In addition, many outside the US will be preparing for the non-farm payrolls report scheduled tomorrow.
Written by Viv Savani. 8:17am, July 4th 2019
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