The Pound has been falling as markets await today’s European interest rate decision against the backdrop of poorly performing UK data. A report on the performance of the UK services sector in February came in lower than expected this morning which was a disappointing result following strong construction, manufacturing and mortgage data earlier this week. For any transfers involving the Euro, stay in touch with your broker today to see how the European interest rate decision affects rates.
Pound Sterling – UK Markets
Sterling has dropped against the Euro and the Dollar this morning following a poor report on the services sector for the month of February. Whereas a reading of 54.3 was expected, the actual figure only came in at 52.6.The PMI services data is the third piece of PMI data to come out this week following manufacturing and construction.
The first two data releases signaled growth and sent the Pound higher so the services sector has therefore been the one of the three to disappoint, which has been a previous trend. This may strengthen fears that whilst manufacturing and construction are pulling the economy further into recovery and growth, it will be harder to tackle the weakness in UK services.
US Dollar – US Markets
The US Dollar fell throughout yesterday as tensions in the Middle East continued to unfold and as markets await the decision from the European Central Bank on interest rates in Europe, with the hawkish rhetoric there, highlighting the extent to which the US is lagging behind.
Comments from Bernanke this week have helped to confirm the Federal Reserve’s view that areas such as the slow job market in the US are creating continued weakness in the economy meaning that an interest rate rise is not on the agenda at present.
Jobless claims this afternoon as well as non-farm payroll data tomorrow will be crucial in casting more light on this area of the economy.
Euro – European Markets
The Euro rose in advance of the European Central Bank decision later today which will be followed by Trichet’s press conference. Whilst the actual interest rate itself is widely expected to be held at 1 percent, the tone of the following press conference is what will be important to markets who are expecting hawkish comments signaling a keenness to raise rates soon.
The Euro is in particular at a four month high against the Dollar. The rising oil prices are also playing their part by fuelling inflationary pressure, therefore making a rate rise even more likely. Inflation projections for 2011 and 2012 will form part of the press conference.
Other Currencies – Highlights
The Norwegian Krone rose to a four year high against the Euro yesterday as the disruption of oil supplies by events in Libya have caused the currency to surge.
Norway is the world’s seventh biggest oil exporter and the ongoing strengthening of the currency throughout last month has led some to believe that any planned interest rate rises by the Central Bank may have to be put aside in an attempt to cool the currency’s acceleration.
British Pound Suffers Losses Ahead of Tuesday's Critical Vote