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Pound slips before services data, euro firms

business-articlesPound slips before services data, euro firms
  • Weaker construction PMI drags on pound
  • Euro climbs after solid German inflation data
  • Surge in oil prices lifts Canadian dollar

Pound braces for negative UK service sector growth
A downgraded UK construction PMI offered the pound little in the way of encouragement on Friday as the sector fell deeper into contraction.
Although the construction sector only accounts for a fraction of UK gross domestic product this slowdown prompted fresh anxiety over the fourth quarter growth rate.
Further weakness could be in store for GBP exchange rates today if the finalised UK services PMI also proves softer than its initial reading.
Confirmation that the service sector also experienced a deterioration in December would raise the odds of a fourth quarter slowdown, putting fresh downside pressure on the pound.
Euro vulnerable to underwhelming Eurozone services PMI
The German consumer price index bettered forecasts to accelerate from 1.1% to 1.5% on the year, giving the euro a leg up.
While this still falls some way short of the European Central Bank’s (ECB) 2% inflation target investors nevertheless took encouragement from the data.
The mood towards the single currency could deteriorate once again this morning, though, if the Eurozone services PMI sees any downward revision.
Signs of weaker inflationary pressure to end Canadian dollar uptrend
The abrupt escalation in US-Iran tensions prompted oil prices to surge ahead of the weekend, buoying the commodity-correlated Canadian dollar.
As Brent crude leapt 4.5% on Friday this gave CAD exchange rates a boost, in spite of the general deterioration in market risk appetite.
Support for the Canadian dollar could weaken this afternoon, however, as forecasts point towards a monthly contraction in November’s producer price index.
Evidence that inflationary pressure within the Canadian economy is easing could drag CAD exchange rates lower across the board.
Upcoming Data:
Monday, 6th January 2020
09:00 EUR Eurozone Services PMI
09:30 GBP Services PMI
13:30 CAD Producer Price Index
Philip McHugh

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)

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