The latest data on the UK services sector has come in above forecast, with a PMI reading of 55.6 vs 53.3 expected. The survey of purchasing managers shows a more optimistic outlook going forward and the news has offered a short term reprieve to the pound with sterling rising from to its lowest level of the week against the US dollar shortly after the release.
However, the pair remains perilously close to last month’s low at 1.3026 and if truth be told today’s data will have little lasting impact on the currency. The FTSE 100 has pulled back a little following the pop higher in the pound but the index remains within striking distance of its all time high at the 7600 level.
Economic data on the whole has been solid for quite some time now with PMI readings showing consistent strong levels of expansion and the unemployment rate is at a 42-year low.
Despite the relatively strong economic backdrop the Bank of England remain cautious that there is a sense of fragility under the surface with Brexit negotiations making worryingly slow progress. Were it not for well above target inflation it appears highly unlikely that yesterday’s historic hike would have occurred and the pound remains susceptible to further declines going forward.