Lewis Edmonds
Affiliate Relationship Manager
UK PMI data and the effect on GBP exchange rates
After a turbulent week of PMI data, focus turns to UK services PMI. If today’s figure is lower than expected it could be bad news for the Pound.
This Sterling update discusses the latest PMI data and looks at how the latest UK Construction figures have affected GBP exchange rates this week. The table below displays the market movements for a number of GBP pairings in the last week:
| Currency Pair | % Change | Difference on £200,000 | |
|---|---|---|---|
 GBP |  EUR | 0.96% | €2200 EUR |
| GBP |  USD | 0.63% | $1780 USD |
| GBP |  AUD | 0.7% | $2520 AUD |
UK construction hit by bad weather
Bad weather caused UK construction to take a heavy hit last month, prompting the biggest falloff in construction data since after the 2016 Brexit vote, when construction firms were hit by over fears from foreign investment. The slump was to 47.0 from 51.4 the previous month, which was more than was anticipated and technically signals contraction within the industry. This is partly why the pound dropped so severely against most of its major counterparts in yesterday morning’s trading. Although construction only makes up around 6% of the British economic output, the sector is closely watched for links to long term investment and UK Gross Domestic Product. A reading as weak as this will be closely watched next month.
Whilst yesterday’s data proved to be a thorn in the side for Sterling, Sterling’s bounce-back ability is what really had investors talking.
Sterling’s day high actually came before the construction data, with GBPEUR reaching 1.1473. After the poor data Sterling dropped to 1.1414, however regained the majority of its losses and at the time of writing was sat comfortably at 1.1450.
The point from all this is that Sterling now seems to have some durability, following an extremely positive March. For clients that don’t know, positive news regarding UKEU transitional deals combined with positive rumours surrounding an interest rate hike in May helped to boost the pound. Reports are now indicating that Sterling may soon break the 1.15 resistance level and if this occurs, 1.15 – 1.17 on GBPEUR wouldn’t be out of the question in my opinion.
UK services PMI data today – what to expect
After a turbulent week so far in the PMI readings, all eyes are on the UK services PMI which accounts for the largest sector of economic output.
A reading of 50.8 is expected today and if this deviates it could create a real problem for the pound if this is worse than expected. This would bring the overall PMI reading down even further which is likely to have a negative impact on Sterling. On the other hand, if this reading is better than expected, we could see a real boost for the pound and a platform to push on for the rest of the month.
For further information on how future events could affect your currency transfer call us on 0044 1494 725 353.
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