Service sector feels the strain

4th October 2019 Market Update

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🇬🇧 GBP –  Another mixed day for the pound which continues to be tough to try to predict. A strong start to the trading day saw sterling hit week highs against the Euro and a 9 day high versus the dollar. The morning push was likely down to efforts from Boris Johnson to put together a final Brexit offer with new backing from several high profile Brexiteers. The gains were unfortunately short lived, as representatives from the EU hit back saying that it does not address issue with the Irish backstop. Adding further to UK woes was services data which showed contraction in the sector. Services makes up about 80% of UK GDP, so signs of weakness in this sector are bound to knock the pound.

🇪🇺 EUR – The Euro enjoyed gains against a basket of currencies yesterday, benefitting largely from GBP and USD weakness. Data wise, it was not great in Europe for the most part, with the service sector not reaching growth expectations across the board. Giving a lift to the single currency was the collective retail sales figure which beat market expectations at 2.1%, showing consumers in Europe are still happy to spend. The Euro has managed to maintain its strength heading into today, tracing back much of the previous losses.

🇺🇸 USD –  There was a string of data out across the pond yesterday, which was largely disappointing for the US. The job market, which has been considered by many as the bedrock for the US economy showed signs of strain as continuing jobless claims creeped up along with initial jobless claims too. In addition to this, the lesser watched non-manufacturing PMI figure fell short of expectations but still remains above the key “50” level, showing the sector is still growing. In terms of rate movements, the dollar has managed to trace back the losses made against the pound yesterday but continues to gradually weaken against the Euro as weak data is likely to be burdening the dollar.

 

Summary:

GBP: The strength of the pound continues to be Brexit led, but can Johnson find a solution to the contentious Irish backstop?
EUR: The Euro has been helped by a weak pound, but the pair could turn volatile as markets begin to factor in the Brexit effects on Europe
USD: The USD loses momentum following weak labour market data, and continuing economic fears


 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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