Sterling recovered from its six day slump to rise against the dollar and the euro this morning after a survey showed UK services sector activity was at a three-year high in February.
Pound Sterling – UK Markets
Sterling rose more than half a cent against the dollar and was also up versus the euro following good news from the UK services sector. At 1020 GMT the pound hovered above the 1.50 level at 1.5006 versus the dollar.
The four point jump in the CIPS/Markit services PMI index from 54.5 to 58.4 significantly reversed January's fall and took the index to its highest level since January 2007. Not many economists had forecast such a sharp improvement. The consensus forecast had been for a reading of 54.9, merely a fraction of the resultant rise.
This couldn’t have come at a better time for sterling, which has suffered serious losses in the past few days due to a blend of fiscal and political worries.
US Dollar – US Markets
The dollar has come under pressure today, largely because things are looking better for the euro and, since the PMI data release, the pound’s skies have brightened as well.
The greenback also suffered at the hands of the Canadian and Aussie dollar, which were boosted by interest rate hike outlooks.
At 1021 GMT US currency traded 0.7337 to the euro and 0.6664 to the pound.
Looking ahead today traders are advised to follow the ISM Non-Manufacturing PMI report due to be released at 1500 GMT as well as the ADP Non-Farm Employment Change estimate due to be released at 1315 GMT. The dollar's level will be determined this week by Greek developments on the one hand and vital economic data from the US on the other.
Euro – European Markets
As a result of positive PMI figures for sterling, the euro fell to around 90.58 pence in earlier trading, a fall of 0.3%on the day, from a previous level of 90.93.
However, the single currency rose from a 9-month low against the dollar this morning, as Greece prepared to unveil its new budget cuts, fueling optimism of an imminent solution to its debt crisis. The Greek government will announce as much as EUR4.8 billion of additional spending cuts today ahead of a March 16th deadline.
As things stand at the time of writing, the euro trades at GBP0.9081 and USD1.3628.
Other Currencies – Highlights
The CAD and AUD were both strong against the US dollar this morning on interest rate hike outlook for the two currencies. The Reserve Bank of Australia raised its benchmark rate for the fourth time, as expected, by a quarter of a percentage point, to 4.0% and, while the Bank of Canada left the interest rate untouched, an exceptionally hawkish statement boosted expectations of a sooner than expected rate hike.
Dollar Weakens as Fed Rate Cut in July Seems Imminent