Sterling buoyed by highest services PMI since 2006

Tom Tong06/Αυγ/2013Currency Updates


Yesterday’s PMI figures strengthened hopes that the UK economy is truly in recovery. Markit’s survey of the manufacturing and construction services had the most positive response ever. The survey has been reporting figures monthly since 1998. The services sector came in at 60.2, which is the highest reading since 2006. The overall composite PMI stands at 59.48.

A poll of business owners also revealed that they had the strongest intentions to hire since the beginning of the financial crisis. This would suggest that unemployment will fall as the economy continues to strengthen.

In the wake of these releases, the pound rose against both the dollar and the euro by 0.39% and 0.47% respectively.

This morning the British Retail Consortium also added to positive news by revealing that July was the strongest month of sales growth since 2006.

This positive news will be taken into account by Mark Carney as he prepares for the BoE’s monetary policy committee report which will be released tomorrow.

Today we see only tier two data to be released in the form of Industrial and Manufacturing production (MoM and YoY). However, the market will be mainly focused on Mark Carney’s report on Wednesday and his views on the adoption of Forward Guidance as a third form of economic intervention.


USD began to decline for the second time against JPY on Monday following the previous Fridays U.S jobs figures which decreased expectations that the federal reserve would begin to purchase less bonds in the near future. These losses were however limited after data showing an acceleration in the pace of growth in the U.S. services sector in July, which added to views that economic growth will pick up in the latter half of the year. USD has lost 3 percent against a basket of major currencies since reaching a peak on July 9 as expectations faded that the U.S. central bank may begin to retract its stimulus as early as September. The Fed displayed no indication of a near-term move after a policy meeting last week.

The trade balance will be released by the Bureau of economic analysis later this afternoon with consensus expecting to see a slight positive gain. If today’s news exceeds expectations, the green-back could extend yesterday’s bullish trend before the end of the week.


Euro is relatively quiet this week with all the major data being released last week.

All ECB members are currently happy with the way the economy is on track as all 17 members voted to keep rates unchanged and a rate cut was not up for consideration unlike last month. The improvement in financial markets since last year appears to be working through the economy, even though private sector lending remains weak said Draghi.

EU banks are looking to adopt the UK’s tough bank capital conditions; they spoke about this yesterday and said they would look at imposing a leverage ratio cap similar to Barclay’s and Nationwide that either have to raise new capital or cut lending to meet new targets.

Markit services and PMI both came in .1% above expected yesterday morning and Retail sales YoY was also marginally better coming in at -0.9%.

Today is a quiet day for the euro with no major data coming out all eyes will be on the ECB monthly report coming out Thursday morning.


Written by Tom Tong

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