Pound Sterling went higher on Thursday October 3rd following the release of better-than-forecast Services PMI data from Markit and the CIPS.
The data, which gives a snapshot of the all-important services sector, read at 54.5, well ahead of expectations for 52.4 with Markit noting:
“The dominant UK service sector moved up a gear at the start of the final quarter of 2016.”
Again, the weaker Pound appears to be helping:
“Faster growth of total business activity was driven by a stronger expansion of incoming new business. New contracts rose at the fastest rate in nine months. Firms linked new work to new business opportunities, rising international demand linked to the weaker pound, improving market confidence and promotional campaigns.”
Service providers in the UK continued to add to their workforces in October.
Employment increased for the third month running, albeit with the rate of job creation remaining well below the marked rates achieved in 2014 and 2015.
Analyst Ruth Gregory at Capital Economics believes that following the Construction and Manufacturing PMIs the all-sector PMI is consistent with quarterly GDP growth of 0.5%.
And, this should ensure the slowdown in 2017 is not too sever:
“We don’t think that the rise in inflation will be too stark by past standards and supportive policy, such as rock bottom interest rates and a relaxation of the planned pace of fiscal tightening in the forthcoming Autumn Statement, should ensure that any slowdown is not too severe. As such, we think that GDP growth will only moderate from around 2.0% this year to about 1.5% in 2017.”
The Pound to Dollar exchange rate rose from 1.2334 on the release to hit a morning best of 1.2368.
The Pound to Euro exchange rate rose from 1.1121 on the release to hit a morning best of 1.1142 in the wake of the data.
It is a busy day for Sterling so anything could happen.
Ahead, keep an eye on:
- The court ruling on Article 50 between 10:00 and 10:30
- The Bank of England policy decision and quarterly inflation report at 12:00
- Governor Carney’s press conference at 12:30