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UK Services Growth Sees Sterling Strengthen, Euro Edges Higher on Greek Dent Relief Optimism and US Dollar Holds Losses after Poor Jobs Data
Published: 3 Jul at 12 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK,
Pound (GBP)
Friday has seen the Pound strengthen versus most of its major peers. The appreciation is the result of better-than-expected British services growth, an important data report given that the services sector accounts for a large portion of the UK’s gross domestic product. The Markit/CIPS Services PMI was expected to increase from 56.5 to 57.5 in June, but the actual result advanced to 57.4. Services growth coupled with the positive construction data released on Thursday caused the Composite PMI to better estimates in June despite a drag caused by stunted manufacturing growth.
Commenting on the Services PMI, Chris Williamson, Chief Economist at Markit stated; ‘While uncertainty caused by the Greek debt crisis rules out any imminent hike in interest rates, the post-election rebound in service sector business activity adds to the likelihood of the Bank of England starting to nudge rates higher later this year. The survey data are indicating an acceleration of economic growth to 0.5% in the second quarter, up from 0.4% in the first three months of the year. However, growth will have to accelerate further in the second half of the year to meet the Bank’s 2015 growth forecasts of 2.5%, and faster growth is by no means assured. Hiring and inflows of new business both slowed in June, and an escalating Greek crisis and ‘Grexit’ has the potential to destabilise economic growth.’
Euro (EUR)
Although the situation in Greece is still throwing up many uncertainties, which is having a marked effect on investor confidence, the single currency edged higher versus its peers on Friday. The appreciation is in response to news that the International Monetary Fund (IMF) conceded that Greek economic recovery would not be sustainable under the current debt load. The creditor has proposed to relieve a large portion of Greek debt if they vote yes in the referendum due on Sunday.
With so much rising on Sunday’s austerity referendum, trader uncertainty is likely to cause the Euro to pare gains as we draw ever closer to the decision. Whatever the result, expect Euro volatility. A Yes would see negotiations back on the table and a new deal which may include debt relief, but the leftist anti-austerity government is very likely to have a complete reshuffle. Finance Minister Yanis Varoufakis has already stated that he will step down if there is a yes vote to austerity. The outcome of a no vote is more difficult to predict with no guarantee that creditors will offer a better deal.
US Dollar (USD)
The US Dollar slumped versus its major rivals on Thursday after labour market data printed disappointingly. Even a fall in unemployment wasn’t particularly positive given that it was accompanied by the lowest participation rate since 1977. A complete absence of domestic data on Friday ought to see the US Dollar holding a weak position versus its most traded competitors.
Friday has seen the Pound strengthen versus most of its major peers. The appreciation is the result of better-than-expected British services growth, an important data report given that the services sector accounts for a large portion of the UK’s gross domestic product. The Markit/CIPS Services PMI was expected to increase from 56.5 to 57.5 in June, but the actual result advanced to 57.4. Services growth coupled with the positive construction data released on Thursday caused the Composite PMI to better estimates in June despite a drag caused by stunted manufacturing growth.
Commenting on the Services PMI, Chris Williamson, Chief Economist at Markit stated; ‘While uncertainty caused by the Greek debt crisis rules out any imminent hike in interest rates, the post-election rebound in service sector business activity adds to the likelihood of the Bank of England starting to nudge rates higher later this year. The survey data are indicating an acceleration of economic growth to 0.5% in the second quarter, up from 0.4% in the first three months of the year. However, growth will have to accelerate further in the second half of the year to meet the Bank’s 2015 growth forecasts of 2.5%, and faster growth is by no means assured. Hiring and inflows of new business both slowed in June, and an escalating Greek crisis and ‘Grexit’ has the potential to destabilise economic growth.’
Euro (EUR)
Although the situation in Greece is still throwing up many uncertainties, which is having a marked effect on investor confidence, the single currency edged higher versus its peers on Friday. The appreciation is in response to news that the International Monetary Fund (IMF) conceded that Greek economic recovery would not be sustainable under the current debt load. The creditor has proposed to relieve a large portion of Greek debt if they vote yes in the referendum due on Sunday.
With so much rising on Sunday’s austerity referendum, trader uncertainty is likely to cause the Euro to pare gains as we draw ever closer to the decision. Whatever the result, expect Euro volatility. A Yes would see negotiations back on the table and a new deal which may include debt relief, but the leftist anti-austerity government is very likely to have a complete reshuffle. Finance Minister Yanis Varoufakis has already stated that he will step down if there is a yes vote to austerity. The outcome of a no vote is more difficult to predict with no guarantee that creditors will offer a better deal.
US Dollar (USD)
The US Dollar slumped versus its major rivals on Thursday after labour market data printed disappointingly. Even a fall in unemployment wasn’t particularly positive given that it was accompanied by the lowest participation rate since 1977. A complete absence of domestic data on Friday ought to see the US Dollar holding a weak position versus its most traded competitors.
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Source: moneytransfer.co.uk