The UK’s services actor which recently has been the star performer for the UK’s economy slowed in July according to the PMI services data which showed a fall from 51.3 in June to 51.3 in July. This is the lowest reading since December 2010 and only marginally above 50 represents growth rather than contraction. With this in mind if our dominant services sector drops along with UK retail sales which during the Olympic period has seen huge footfall drop of over 10% according to a recent Experian report. Also, we saw the weakest manufacturing figures in more than three years which had the data at 49.5 from 51.1 the lower since the lows of the financial crisis in April 2009. the UK GDP figures out recently also displayed the UK as falling to -0.7% which firmly reps the country in recession. The only bright thing shining in the UK over the last week seems to be the Gold medals won by Jessica Ennis, Greg Rutherford and Mo Farrah this weekend. Even Murray won a gold!! Although the data from Friday was low the survey also asked the sector what they thought about the year ahead and the confidence index saw a rise to 65.6 from 64.3 in June.
All the negative news you could argue could be detrimental for Sterling and yes this was demonstrated with Friday’s drop against the single currency but it is always important to look at the currency pair and in this case the focus should be firmly on the Eurozone. Many predictions have put the GBPEUR exchange rate at 1.35 in the next six months and although the end of the week was arguably a tough one for Sterling the longer term view is negative for the Euro. The European Financial Stability Facility is in the process of putting through measures to organise repurchase frailties, unsecured and secured loans from banks. This could be a welcome signal for the Euro but just remember that since the crisis began there have been over 20 meetings and still the crisis seems far from over. The phrase used by many for a long time is you cannot use a band aid to cover the problem and the boil needs lancing. This recent rally seems to be short term and even if the agreement does take place it is likely that we’ll only see a small improvement for EURGBP and EURUSD. Still the various leaders within Europe don’t seem to be in agreement as Draghi, Monti and Merkel have yet to agree the best solution to solve the crisis. If Spanish bonds continue to top out over 7% it is inevitable that country may be forced to accept a bailout meaning huge economic and political implications for the single currency.
Things to watch out this week include
Tuesday morning the Reserve Bank of Australia releases its interest rate decision and currently rates stand at 3.5% with no change expected. If there is we could see some improvement on GBPAUD exchange rates
Later that same day the NIESR GDP estimate is announced. if this is in line with expectation it is unlikely we’ll see much movement for the Pound but anything higher than -0.7% could see s short term life for the value of Sterling s if you have a need to sell currency into Sterling it may be worth doing something during Monday or by Tuesday morning to avoid the uncertainty.
Wednesday is the Bank of England inflationary report which will signal whether or not the Bank of England need to intervene with further monetary policy changes next month. If you have a currency requirement needing to sell Euros or buy US Dollars or indeed any other major currency pair then feel free to get in contact with me directly Tom Holian firstname.lastname@example.org I work for a one of the longest established currency brokers in the industry so if you have a question please also don’t hesitate to get in touch as I’m more than willing to help. email@example.com