What’s been happening?

Pound Sterling – UK Markets 

IHS Markit’s UK Services PMI on Friday showed that the business activity in the sector expanded at its slowest pace since April as it eased to 53.5 in July from 55.1 in June. Once again, the uncertainty surrounding Brexit impacted the data negatively. Commenting on the findings of the report, “Looking at demand fundamentals, service providers commented that Brexit uncertainty had held back new project wins, reflecting risk aversion and a wait-and-see approach to investment spending among international clients,” said Tim Moore, Associate Director at IHS Markit.

The pound, which suffered heavy losses against its peers following Mark Carney’s remarks on Thursday, extended its downside movement against the greenback on Friday and closed the week below 1.30 for the first time in nearly a year. 

US Dollar – US Markets

The monthly report released by the U.S. Bureau of Labor Statistics showed that the total nonfarm employment increased by 157,000 in July compared to analysts’ expectations of 190,000. Despite that disappointing reading, the unemployment rate ticked down to 3.9% from 4% in June. More importantly, the numbers for May and June both got revised higher, from 244,000 to 268,000 in May and from 213,000 to 248,000 in June. Additionally, wage inflation measured by the average hourly earnings, stayed steady at 2.7% on a yearly basis to match experts’ estimates.

After falling sharply toward the 95 handle with the initial reaction to the NFP report, the US Dollar Index, which tracks the buck against a basket of six major currencies, easily retraced its losses but failed to extend higher amid disappointing PMI numbers. IHS Markit’s headline Services PMI in the U.S. retreated to 56 in July from 56.2 in June. “Business expectations across the service economy edged down to a six-month low. Survey respondents cited concerns about rising costs and trade frictions, alongside difficulties sustaining the tempo of new business growth seen in the second quarter of 2018,” Tim Moore, Associate Director at IHS Markit, noted. In the meantime, the non-manufacturing PMI released by the ISM slumped to 55.7 from 59.1, and the publication highlighted that tariffs and deliveries were an “ongoing concern.” 

Euro – European Markets

According to the Eurostat, the retail trade volume increased by 0.3% in the euro area and by 0.6% in the EU28 in from May to June and brought the annual change down to +1.2% compared to analysts’ expectation of +1.4%. 

IHS Markit’s Germany Services PMI retreated to 54.1 in July from 54.5 in June, but the sector remained healthy with service providers maintaining their positive outlook towards activity in the next 12 months. On the other hand, Services PMI in the eurozone pulled back from the four-month-high that it recorded at 55.2 in June with 54.4 in July. “If the headline index continues to track at its current level, quarterly GDP growth over the third quarter as a whole would be little-changed from the softer-than-expected expansion of 0.3% signalled by official Eurostat data for quarter two,” argued Rob Dobson, Director at IHS Markit.   

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Monday that could significantly impact the pound’s valuation. In fact, until Friday’s GDP growth figures, the economic calendar seems relatively quiet.     

US: With a virtually empty economic docket, investors will be focused on trade headlines.

EU: Sentix Investor Confidence from the eurozone and factory orders from Germany will be featured on Monday. None of these data are likely to cause sharp fluctuations in the euro-denominated pairs.