Summary:
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UK Services PMI for February: 51.3 vs 49.9 exp
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Pleasing beat given the weakness in other PMIs lately
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GBPAUD respecting resistance around 1.8725
The latest read on the UK service sector has come in better than expected, with the PMI reading for February rising to 51.3. This keeps the indicator above the 50 mark and crucially means that it hasn’t followed the construction equivalent into contraction territory. There are 2 factors that make the beat all the more pleasing; first that the service sector is by far the largest and second that while the manufacturing reading for last month remained above 50, it was due in no small part to record levels of stockpiling for fear of a no-deal Brexit - something which is hardly positive and isn’t really feasible for services.
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The UK service sector activity unexpectedly rose last month, but the big picture still doesn’t look to promising for the overall economy. Source: XTB Macrobond
The Pound is trading back below the $1.32 mark this morning after 3 consecutive daily losses, although this is more due to a persistently strong buck rather than weakness specific to sterling. The market isn’t really that sensitive to these data points at present, with the focus almost solely on Brexit, but that doesn’t mean they be dismissed out of hand. While the data is better than forecast and in fact the highest in 4 months, it’s worth pointing out that it is also consistent with a measly first quarter GDP growth of just 0.1%, so any positivity should be kept firmly in check and put in perspective.
Looking ahead, BoE Governor Carney is set to speak this afternoon before the House of Lords Economic Affairs Committee on topics including Brexit, inflation and the economy in what has the potential be a major market mover for the pound.
GBPAUD has run into resistance once more around 1.8725 with a shooting star of sorts printed yesterday. Source: xStation
