Positive UK Services Sector Boosts Pound
Sterling strengthened against the US Dollar and the Euro, having received a boost from positive UK services data. IHS Markit published its September Services Sector PMI data which showed that activity improved modestly after hitting an eleventh-month low in August. The survey’s result was unexpected and eased concerns of a sharp economic slowdown, making traders buy the Pound.
The US president Donald Trump received from his advisers a shortlist with candidates to replace Janet Yellen as the Fed’s Chair. Yellen’s name is on the list, but it is unlikely that she will be reappointed. Trump visited the devastated island of Puerto Rico and promised that he will erase the enormous government debt. In the Eurozone, the bloc’s economic recovery strengthened in September. Markit’s survey showed that jobs were created at the fastest rate in the last decade.
Pound Sterling – UK Markets
Today, the Pound jumped against the Euro with the exchange rate set at $1.32. Sterling also edged up against the Euro with the exchange rate set at €1.12. The British currency got a boost when IHS Markit published its UK Services PMI data for September.
Markit’s survey showed that the UK’s services sector managed to rebound from an eleven-month low in September. The course reversal was unexpected since City analysts had forecast that the Services PMI reading, in September, would match that of August’s. The survey showed that there was a sustained rise in the services sector output during the first month of autumn, but the number of new orders rose at the slowest pace in the last thirteenth months.
Economists believe that, although the services sector performed well in September, the subdued domestic demand and the disappointing readings from the construction sector don’t leave much space for hopes that the British economy improved in the end of the third quarter of the year. Chris Williamson, who is Markit’s chief economist wrote that “the economy is on course for another subdued 0.3% expansion in the third quarter, but the fourth quarter could see [an] even slower growth. The Markit surveys portray an economy struggling with the combination of sluggish growth and rising prices, presenting a dilemma for policymakers.”
US Dollar – US Markets
The US Dollar dipped against the Euro with the exchange rate set at $0.85. The US Dollar Index (DXY), which measures the value of the Dollar against six major competitor currencies, also fell coming in at 93.51.
According to the Wall Street Journal and Politico, Donald Trump has received a shortlist with candidates for replacing the Fed’s Chair Janet Yellen, after her term ends in February 2018. Bloomberg sources said that Yellen’s name is still under consideration for re-appointment, but very few presidential advisers are in favour of that. Kevin Warsh and Jerome Powell along with Gary Kohn are the names on the top of the list. Media sources said that Trump has already had discussions with them and he will announce his decision in the next weeks.
Donald Trump doesn’t seem to stop surprising us whenever he gets the chance. The US President visited Puerto Rico, two weeks after Hurricane Maria completely destroyed the island’s infrastructure system. 3.5 million residents are still without power, in a country that was already facing an enormous debt problem, even before the hurricane’s catastrophic consequences. Trump said in an interview on Fox that “they owe a lot of money to Wall Street and we are going to have to wipe that out. I don’t know If it’s Goldman Sachs, but whoever it is you can wave goodbye to that.” Neither the White House nor Goldman Sachs responded to the President’s comment.
Euro – European Markets
The Euro kept strengthening against the US Dollar for a second day with the exchange rate set at $1.17. The single market currency is back for good in recovery mode, assisted by positive data coming from the services sector. The German benchmark DAX index hit an all-time high this morning, having gained 13% since the beginning of the year.
IHS Markit released its Services and Composite PMIs for the countries of the Euro-bloc and the Eurozone as a whole. The Eurozone’s Composite PMI, in September, came in line with analysts’ expectations with the figure indicating the fastest growth in the last four months. Germany and France led the way with their Composite PMIs hitting six-year highs. The Italian Composite PMI was the only one disappointing experts, hitting a six-month low in September.
Despite the positive news coming from the Eurozone’s economy, retail sales across the Euro-bloc suffered unexpectedly in August, according to Eurostat. Data showed that retail sales rose by only 1.2%, on a yearly basis, instead by 2.6% that analysts were anticipating. On a month-to-month basis, retail sales were reduced by 0.5%, again missing analysts’ expectations who had been expecting a 0.3% rise. The retail sales drop in August is the largest recorded since March 2016.
Other Currencies – Highlights
Sterling remained stable against the Australian Dollar, trading at 1.68 AUD. The Reserve Bank of Australia (RBA) kept its benchmark interest rate unchanged at 1.5%, while banks seem to disagree on when the RBA will decide to increase it. A report by Barclays said that the RBA will wait for signs for a broad-based economic recovery before it proceeds in hiking rates twice in August and November 2018. On the contrary, HSBC analysts suggest that the recent improvement in the labour market will force the RBA to lift rates in early 2018.
The Pound gained ground against the New Zealand Dollar, trading at 1.84 NZD. Quotable Value, which is a property valuation service, published a report which indicated that the annual growth in New Zealand property values continued to slow down in September. Data showed that average housing values in Auckland dropped for the fourth consecutive month, reaching previous year’s levels. House prices are not the only ones dropping in Auckland as an ANZ report showed that the number of job ads posted in the area fell for the fifth straight month.
Sterling inched lower against the Japanese Yen, trading at ¥149.30. The Deputy Governor of the Bank of Japan (BoJ), Hiroshi Nakaso, stressed the need to create a sustainable fiscal framework in the country. Nakaso said that setting a 2% inflation target, as other major central banks have done, would stabilise currency moves in the long run.