Sterling gains on stronger Services figures

As the new month’s data continues for the UK, Sterling received a much-needed boost yesterday to help recover a small portion of its losses last week. After very flat Manufacturing and Construction PMI figures, yesterday saw the more important Services sector post its latest PMI data for February. Markets were anticipating a small improvement to 53.3 from 53 in January however actual figures surpassed this at 54.5, helping the pound recover around half a cent against the Euro and a cent against the US Dollar. Buying levels against weaker currencies like the Aussie or Loonie are now the best seen since the referendum back in 2016. Against the much stronger Euro, the picture is however very different with many technical signals now pointing a further downside pressure as GBP/EUR made a new low on Friday for 2018 with rates slowly slipping in Euros favour over the last month.

Th Euro itself also enjoyed a slightly better day as Retails Sales figures came in at 2.3% on the year, against expectations of just 2.1%. With Angela Merkel has now agreed on a new coalition government in Germany, it is now over to the Italians to do the same after the populist Five Star Movement gained over 30% of votes at the weekend. A number of coalition possibilities remain on the table although any deal looks difficult given the difference of opinions amongst the parties with the most seats. It seems that coalition governments are becoming more and more the norm across Europe as voters continue to make their voices heard by voting against the established parties that have held power in recent years.

The next few days will see a slight lull in key data announcements ahead of a few big releases at the end of the week. Bank of Canada interest decision is the main event tomorrow, followed by the ECB decision on Thursday lunchtime and US Non-farms on Friday. Sterling markets still have a clear focus on Brexit negotiations as the pound has been extremely reactive to recent updates, whilst failing to get the same movements from monthly data announcements. This leaves the pound in a very precarious position in the coming weeks and months as the difficult trade talks get underway with the 2 sides currently on very different pages with regards to the desired end result. If you do not wish to gamble on the Brexit impact on Sterling, ask your broker today about our Forward contracts where you can remove all the risk and guarantee a rate for up to 2 years ahead.