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Pound vulnerable to UK service sector stagnation

business-articlesPound vulnerable to UK service sector stagnation
  • Pound vulnerable ahead of UK services PMI
  • Stronger Eurozone retail sales data to offer euro boost
  • US dollar set to extend gains on solid non-manufacturing index
UK service sector slowdown may drive pound losses
The pound looks vulnerable ahead of this morning’s UK services PMI, given the weak nature of the corresponding manufacturing and construction sector data.
If growth in the sector stagnates as forecast this could weigh heavily on GBP exchange rates.
As the service sector remains the primary engine of growth for the UK economy any slowdown here is likely to drag on the first quarter gross domestic product.
Unless the PMI demonstrates greater signs of resilience, shaking off the impact of Brexit-based uncertainty, the mood towards the pound looks set to sour today.
Euro to find rallying point on Eurozone retail sales rebound
Forecasts point towards a solid rebound on the month in January’s Eurozone retail sales data, offering the euro a potential rallying point this morning.
Stronger levels of consumer spending would go some way towards offsetting the general decline in global trade which has dented the Eurozone economy in recent months.
Another underwhelming month of sales, on the other hand, may encourage the single currency to extend its losses further.
Either way, demand for the euro is likely to prove limited as investors brace for Thursday’s European Central Bank (ECB) policy meeting.
Strong non-manufacturing composite index to boost US dollar
USD exchange rates could find fresh support this afternoon on the back of the ISM non-manufacturing composite index for February.
Investors expect to see another strong month of growth for the sector, with the headline index forecast to strengthen from 56.7 to 57.3.
As long as the index remains comfortably above the neutral baseline of 50, though, the US dollar looks set to remain on a solid footing against its rivals.
Market optimism over progress towards a US-China trade agreement may also help USD exchange rates remain on an uptrend today.
Upcoming Data:
Tuesday, 5th March 2019
09:30 GBP Services PMI
10:00 EUR Eurozone Retail Sales
15:00 USD ISM Non-Manufacturing Composite 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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