Pound supported by strong Services PMI data

Daily Currency Update

Friday saw the latest PMI data released from the UK with the closely watched Flash Services number beating forecasts by some distance. No change from last months 52.9 was expected however 54.9 was seen, its highest reading in a year. Given the service sector makes up around 80% of the UK economy particular attention is paid to this report which is put together by S&P Global and the Chartered Institute of Procurement and Supply.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence comments included that “the key takeaway is that the economy as a whole is not only showing encouraging resilience but has gained growth momentum heading into the second quarter, the latest PMI reading broadly indicative of GDP rising at a robust quarterly rate of 0.4%.” He also commented he expected at least one more rate hike would be needed by the Bank of England to combat persistently high inflation, which still remains in double digits. Offsetting this good news was a worse than expected Manufacturing PMI which came in at 46.6 versus an expected 48.3. This was the ninth sub-50 reading in a row, the level which shows whether a sector is expanding or contracting. The result was seen as a net-gain however and GBP/USD pushed back through the 1.24 level.

Earlier in the day UK Retail Sales had shown a worse than expected fall which is likely due to shoppers reigning in spending in the face of CPI that stands at 10.1%. Looking ahead it’s a relatively quiet week from the UK with no top tier data of note. GBP/USD is currently around 1.2440 and GBP/EUR is at 1.1330