UK services sector slides

Another rough day for PM May ahead, and continued Australian trade tensions put their mark on currency markets today.

Previous Day's Market Highlights

Yesterday morning had the pound and euro sparring, with data releases from both keeping the interest of ringside investors. The Eurozone PMI data was the first missed punch, as although the services output recorded a slight uptick on a monthly basis, the composite reading of business activity registered its lowest level since September 2016. However, GBP couldn’t offer a counter, as services PMI at 09.30 expanded at the weakest level for almost two-and-a-half years, recording 50.4 and down from 52.2 previously. EUR retail sales provided the first positive reading of the day up, 0.3% month on month. Despite this, GBP/EUR followed a slight upward trend, reaching 1.1270 by midday. GBP/USD followed a similar pattern, climbing to just 2 pips short of the 1.28 mark.

In the afternoon session, the BOC left rates unchanged at 1.75% as expected. However, but this didn’t stop the CAD falling 1c against GBP due to a dovish statement by the Governor. He stated that trade conflicts are weighing on demand and that although data showed the Canadian economy grew in line with the Q3 projections, it is unlikely to sustain momentum in Q4. Overall, the BOC looks to be setting itself up for a move to the side-lines for a few months.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1227 1.1506 1.1188 2.71%
GBP/USD 1.2721 1.3175 1.2658 3.43%
EUR/USD 1.1330 1.1500 1.1275 1.96%
GBP/AUD 1.7627 1.8149 1.7210 5.17%
GBP/NZD 1.8508 1.9484 1.8290 6.91%
GBP/CAD 1.7078 1.7285 1.6721 3.26%

Today's Market Highlights

In the overnight session, AUD Retail sales registered a 0.3% increase m/m, in line with forecast. However, this failed to offer any support to the Aussie in light of heightened trade tensions. AUD lost another 0.4% overnight against the pound, touching 1.7625. Headlines today will be focused around the all-day OPEC meeting in Vienna. They are expected to agree on some form of production cut in an attempt to stabilise US crude prices, which plunged 22% in November.

At 1:15pm, focus lies with US ADP Non-Farm Employment change expected to show 195k jobs were added in the month of November. This is to be followed by CAD trade balance at 1:30pm followed by BOC Governor Poloz speech on the economic outlook. Later in the US sessions we have 2 FOMC members speaking followed by the Fed Char Powell who is due to speak on the economy, but unlikely to mention monetary policy.

In UK politics, the 3rd round of the Brexit debate will be held in the house of commons today. It doesn’t look like it’s going to be a let off for Theresa May as the DUP’s Wilson reiterated that the party will vote against May’s Brexit unless changes are made.

Today's Economic Calendar

Time Currency Release Consensus Previous
All day EUR Opec meeting
13:30 USD ADP Non-Farm Employment Change 195k 227k
13:30 CAD Trade balance -0.7B -0.4B
13:35 CAD Poloz Speaks
15:00 USD ISM non-manufacturing PMI 59.1 60.3