Pound Falls after UK Service Sector Slows Down
Sterling slumped against the US Dollar and the Euro, pressed by the downbeat figures of the UK’s services PMI, which were published by the IHS Markit data firm. The UK’s service sector experienced a slowdown in June, performing worse than expected. The service sector PMI reading, combined with the declining PMI readings in the manufacturing and construction sectors published earlier in the week, show that political uncertainty and Brexit are hurting the British economy.
On the contrary, the same Markit survey showed that Eurozone private businesses have posted their best performance in the last six years, during the second quarter of 2017. Data released by Eurostat showed that retail sales across the Eurozone jumped in May by 2.6%, on a yearly basis, surpassing expectations.
Pound Sterling – UK Markets
Today, Sterling slumped against both the US Dollar and the Euro. The Pound lost 0.18% in value against the US currency, trading at $1.29. The British currency also lost ground against the Euro with the exchange rate set at €1.13.
IHS Markit published its UK Market Services PMI for June, which deteriorated for a second straight month and completing a triple-hit of disappointing PMI survey readings for the first month of summer. New business growth eased to a nine-month low, while job creation picked to a fourteen-month high. According to Markit, optimism across business owners dropped to the second-lowest level since December 2011. Markit’s survey indicates that the risks are tilted towards the economy slowing in the third quarter.
A survey published by the Society of Motor Manufacturers and Traders (SMMT) showed that car registrations dropped by 4.8% in June, declining for the third consecutive month. From January until the beginning of July, car sales were down by 1.1% this year when compared with those in 2016. SMMT’s chief executive, Mike Hawes, said that he expects the demand to remain in high levels over the coming months, but blamed the recent tax changes for the fall of the last months.
US Dollar – US Markets
The US Dollar strengthened against the Euro, trading at €0.88. The celebration of the US Independence Day has put on hold every significant economic update from across the Atlantic.
Later in the day, investors and traders are waiting for the release of the Federal Open Market Committee’s (FOMC) June meeting minutes. Markets will be searching for clues indicating when the Fed will start tapering its expanded balance sheet.
A report published by Rabobank suggested that the US Dollar was the worst G10 currency performer for the first half of 2017. The Dutch bank’s analysts said that the US currency suffered from reduced hopes for a fiscal reform, weak US economic data and scepticism over the Fed’s ability to deliver a third rate hike towards the end of the year.
Euro – European Markets
The Euro dropped against the US Dollar with the exchange rate set at $1.13. IHS Markit published its Market Services PMIs for each of the Eurozone countries and the Eurozone as a whole.
The figures showed that Eurozone private businesses managed their best performance in the last six years, during the second quarter of 2017. Elevated business confidence and a strong inflow of new orders helped in creating new workplaces at the fastest pace over the last ten years.
According to Markit’s report, in Spain business confidence is in the highest level seen in the last two years. Firms in France reported a hike in new business, spreading optimism that this will lead to the creation of further new jobs in the coming months. Germany’s private sector output growth was measured as the weakest since Ferbuary, but manufacturing output increased at the second fastest pace since April 2011.
Other Currencies – Highlights
Sterling lost ground against the Australian Dollar, trading at 1.69 AUD. Economist Michael Callaghan warned that replacing the existing petroleum tax would have damaging consequences for the Australian economy as an attractive place for investments. Callaghan was appointed by Treasurer Scott Morrison to write a report on the petroleum resource rent tax (PRRT). Callaghan’s view comes in contrast to claims that Australia is missing out on billions of dollars in tax from gas exporters. Australia will eclipse Qatar as the world’s largest exporter of gas by 2020.
The British Pound gained ground against the New Zealand Dollar, trading at 1.77 NZD. The Kiwi remained unaffected by the rise in New Zealand’s commodity prices in June. According to ANZ’s Commodity Price Index, the monthly increase was led by milk fat products and sheep meat. Dairy price gained 2.9% in value and meat prices 2.8%.