Slowest UK Services Growth in Over 2-Years sees British Pound (GBP) Exchange Rate Dive
Pound Sterling (GBP) Declines after UK Services Output Misses Estimates
Against the majority of its most traded currency rivals, the British Pound declined in the first half of Monday’s European session. The Pound Sterling exchange rate dived by around -0.5% against the Euro, Australian Dollar and Canadian Dollar. Against the New Zealand Dollar the Pound softened by around -0.9%, but the British asset gained by just 0.2% against the US Dollar and 0.4% against the Japanese Yen.
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The lack of demand for Sterling can be attributed to domestic data which showed the services sector grew at the slowest pace in over two years. The UK Services PMI was forecast to tick higher from 55.6 to 56.0 in September, but the actual result dropped to 53.3. Given that the services sector accounts for the largest portion of British Gross Domestic Product, the poor result is likely to have a long-term impact on Sterling trade. In addition, the disappointing result suggests that British growth in the third-quarter will be significantly slower than the previous quarter despite negative revisions.
Chris Williamson, Chief Economist at Markit Comments on the UK Services Data
‘Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular. There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels. Wider business service sector confidence has meanwhile also been knocked by global economic worries and financial market jitters. At the moment, sustained strong hiring in services and construction suggests that companies are generally expecting the slowdown to be short-lived. But with the three PMI surveys collectively recording the weakest inflows of new business for two-and-a-half-years, there’s a strong likelihood that the slowdown could intensify in coming months.’
GBP/USD Exchange Rate Edges Higher after US Non-Farm Payrolls Shock to the Downside
One of the few currencies the British Pound advanced against on Monday morning was the US Dollar. After Friday’s data showed US Non-Farm Payrolls missed estimates significantly, demand for the US Dollar slumped. Traders continue to digest the weak NFP figure on Monday with speculation that the Federal Open Market Committee (FOMC) will be forced to delay a benchmark rate hike until labour market conditions pick-up.
Rob Carnell of ING described the US NFP report as ‘uniformly dreadful’, stating; ‘The other disappointment in the data was from hourly wages growth, which only needed to show a 0.2% month-on-month increase to take its annualized growth rate into new territory. But instead, it was unchanged, and the annual rate remains stuck at 2.2% YoY. Not enough to get the Fed doves vote for a hike, at least not yet…For once, these labour market numbers gave an unambiguous result. The problem is that it was unambiguously negative. No rate hike this month then it seems. But it raises doubts too about the probability of a December hike, unless the Fed changes the basis upon which it decided policy rates.’
GBP/JPY Conversion Rate Climbs on BOJ Stimulus Bets
In addition to improving market sentiment seeing dampened demand for the Japanese Yen, the asset softened versus its major peers in response to speculation that the Bank of Japan (BOJ) will introduce more accommodative monetary policy measures amid recession concerns. ‘Further easing is the only choice left to the BOJ,’ said Masaaki Kanno, an economist at JPMorgan Chase & Co. and former BOJ official. ‘If the BOJ doesn’t act in October, its credibility will be hurt, triggering Yen gains and slump in stocks.’
Pound Sterling Spot Rates Today
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3486, moving between a low of 1.3461 to a high of 1.3557. .
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5194, trending within the range of 1.5169 to 1.5245.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 2.1387, hitting a low of 2.1382 and a high of 2.1572.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending in the region of 2.3274, moving between a low of 2.3265 to 2.3581.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.9875, reaching a high of 2.0006 and dropping to a low of 1.9857.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is currently trending in the region of 182.7400, fluctuating between a low of 182.1800 to a high of 183.2000.