Volatile Start to the Week for UK Currency
The pound remained fairly subdued towards the end of last week as Thursday and Friday saw low trading volumes as many decided to take Thursday and Friday as bridging days to extend the festive period. However, on Monday we saw some moderate strength in the pound after better than expected services data from the UK pushed sterling up against most of its major counterparts.
Survey data from IHS Markit on Monday showed that the Purchasing Managers’ Index, a good barometer for the health of the sector, came in at 50 for December – an improvement over November’s reading of 49.3. The figure beat economists’ forecasts of 49.2 and showed that activity in the sector was unchanged. Services data is particularly important for the UK as the sector accounts for around 80% of economic output. The numbers sound underwhelming but the last three releases all showed contraction within the sector so any reading that isn’t negative is seen as a step in the right direction and the pound strengthened as a result.
However, the pound’s gains were fairly short lived as the UK currency lost ground on Tuesday afternoon as speculation mounts over Boris Johnson’s plans to pursue a harder Brexit. At the time of writing, GBP/EUR is trading in the mid 1.17’s and GBP/USD is sitting in the low 1.31’s.