Service sector miss does little to help the pound

The most recent data from the UK service sector has done little to boost the near-term prospects for the pound, with the currency falling down below the 1.30 handle to retest last month’s 10-month low against the US dollar in the initial reaction. A print of 53.5 was below the expected 54.7 and comes just a couple days after the manufacturing equivalent also missed forecasts. The print is by no means disastrous but it does serve to reaffirm the notion that the economy is far from firing on all cylinders and there will need to be a significant pick-up in these data points to justify further rate increases going forward.  

US employment data in focus

The pound failed to rally on Thursday, despite the Bank of England delivering not only an increase in rates but also fairly hawkish policy message and now the shorts appear to have control of the tape and are looking to push the market lower. For the GBP/USD cross this afternoon’s US jobs report could also be potentially market-moving with a strong print likely to further aid the recent appreciation in the buck, with the US dollar rising close to a 1-year high this morning on a trade-weighted basis.   

Carney sees uncomfortably high risk of no-deal Brexit

BoE Governor Mark Carney is facing more criticism this morning after declaring that the risk of a no-deal Brexit is “uncomfortably high.” The governor described the UK crashing out of the EU without a deal as “highly undesirable” and both parties “should do all things they can to avoid it. “ While this is quite clearly an accurate assessment of the current political backdrop it has not stopped critics hitting out not long after several bemoaned the bank’s decision to hike rates yesterday. Carney will likely be feeling that he is damned-if-he-does and damned-if he-doesn’t after he was also criticised for keeping rates on hold back in May.  

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