Growth at a 3-year Low in Britain’s Services Sector
The all-important UK services PMI, which came out just now, indicated that the nation’s dominant services sector in February recorded its weakest reading since March 2013. This follows a ten-month low in construction PMI and weak manufacturing data released earlier in the week which collectively suggests that the UK economy has lost traction in the first quarter of this year.
Earlier today, a slew of services PMI data in Europe painted a broadly positive picture for the Euro zone and its peripheries. However, some headwinds related to slowing growth in emerging markets and political uncertainty appeared to have limited the scope for growth. Across the Atlantic, key updates including jobless claims, ISM non-manufacturing index and factory orders, scheduled for release later today, will shed more light on the health of the US economy.
Pound Sterling – UK Markets
Earlier today, the Pound surrendered most of its gains against the US Dollar amid broad based recovery in the greenback. In addition, the just released UK PMI print indicated that activity in the service sector was worse than expected in February, driving growth to a near three-year low. This data follows recent poor results from both the manufacturing and construction PMI’s for the similar period, suggesting that the UK economy might slow down in the upcoming quarters. Sterling slipped lower but just shy of 1.40 mark against the US Dollar, following the release of Britain’s services activity growth data. The Pound is likely to remain on the downside for the foreseeable future as recent economic fundamentals signal that a rate rise remains a distant possibility and as market concerns regarding the UK’s EU referendum continues to weigh heavily on sentiment.
Separately, Nationwide reported that UK house prices growth remained steady for February with much of the increase related to the impending rise in stamp duty on second homes, which is due to take effect in April 2016.
US Dollar – US Markets
The US Dollar edged higher against the shared currency yesterday, boosted by the better than expected US ADP employment report, but the pair quickly reversed its course later in the session. In separate news, the US Federal Reserve (Fed) in its Beige Book report indicated that economic activity continued to expand in most districts from early January to late February. But more than half of the districts stated that the pace of activity growth remained sluggish as the manufacturing industry continues to struggle, offsetting the recovering housing market and growth in consumer spending. This mixed picture of the US economy will likely make Fed policymakers anxious when they meet this month to decide the interest rate path.
The greenback has recovered most of its losses against the Euro this morning, ahead of the weekly jobless claims, factory orders and the ISM non-manufacturing PMI index. Data released earlier had suggested that US manufacturing is still weak, but the macro profile from other corners is showing signs of strength. Today’s updates are on track to enhance that macro outlook.
Euro – European Markets
The shared currency is trading in a tight range against the US Dollar this morning. Earlier in the day, the final services PMI reading for the Euro zone indicated that the sector expanded at a faster pace than initially thought for February. However, overall Euro zone businesses had the worst month in over a year in February as the final composite PMI index recorded its weakest reading since February 2015 last month. The slowdown in growth of business activity, accompanied by signs of deflationary pressures in the Euro zone is likely to push further expectations of more monetary policy easing by the European Central Bank in the upcoming meeting. In addition, the PMI survey has raised the possibility of the region losing its recovery momentum further from the already meager pace seen late last year.
In a short while, investors will shift their attention towards Euro zone’s retail sales report which is anticipated to show more weakness in consumer spending growth in January. If the expectations hold true in today’s January report, it would further build the case of deterioration in the Euro zone’s economic growth at the start of 2016.
Other Currencies – Highlights
The Aussie Dollar maintained its upside momentum and moved above the 0.73 mark against the greenback earlier today after the release of another positive data print in Australia. Official figures indicated that Australia’s trade deficit narrowed more than expected in January from a downwardly revised trade deficit a month ago. The narrowing deficit was due to an increase in the nation’s exports, matching a similar decline in imports. Coal, fuel and oil contributed positively to exports, while a month-on-month drop in fuel purchases coinciding with a fall in oil prices led to a fall in imports. The improvement in Australia’s trade data offers an indication that the surge seen in the nation’s fourth quarter economic growth has carried over into this year despite financial market turbulence.
Earlier in Australia, a survey showed that Australia’s services sector swung back to expansion in February. Later in the day, a slew of economic releases in the US will be eyed by investors for further direction in trading in the Aussie Dollar - US Dollar currency pair.