GBP/USD Rises as UK Services PMI Beats Expectations
- UK service-sector PMI beat expectations in September, strengthening the British Pound.
- Euro-Zone retail sales fell month/month in August.
- Earlier, the final Euro-Zone service-sector PMI hit 55.8, above the flash estimate of 55.6.
The purchasing managers’ index for the UK’s dominant service sector exceeded expectations in September, rising to 53.6 from August’s 53.2. An unchanged number had been expected.
That gave a lift to the British Pound, even though the composite PMI for September, also at 53.6, was down from 53.7 in August and at its lowest since February. While there was a sustained rise in service-sector output during September, new business growth eased to a 13-month low and input cost pressures intensified.
Chart: GBPUSD Five-Minute Timeframe (October 4, 2017)
“The UK is still growing but, excluding the slowdown surrounding last year’s referendum [on Brexit], Q3 PMI readings have been the worst since Q1 2013,” commented Chris Williamson, chief business economist at IHS Markit, which compiles the data. “At 53.6, the latest all-sector UK PMI has fallen further into territory normally associated with the Bank of England cutting, not hiking, interest rates,” he added.
The UK is widely expected to increase rates later this year, with both the markets and economists looking for a quarter-point rise perhaps as early as the November 2 meeting of the central bank’s monetary policy committee.
In the Euro-Zone, retail sales data for August showed an unexpected fall of 0.5% month/month when a 0.3% gain had been predicted. That left sales growth year/year up by just 1.2% when a 2.6% gain had been predicted.
Earlier, some mixed PMI data from the Euro-Zone left the Euro little changed. The service-sector PMIs for Italy and France came in lower than expected but the German figure was in line with the earlier “flash” estimate and the final September PMI for the Euro-Zone as a whole was higher than first predicted, at 55.8 rather than 55.6.
“The Euro-Zone economy ended the third quarter with a flourish as output growth accelerated to a four-month high in September, underpinned by the steepest gain in new work received for almost six-and-a-half years,” commented IHS Markit.
Chart: EUR/USD Five-Minute Timeframe (October 4, 2017)
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at email@example.com
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