The Pound (GBP) fell to its lowest level in 10-days against the Euro (EUR) and slipped to an 11-month low against the US Dollar (USD) on Friday as the latest Services Purchasing Managers Index (PMI) fell to a 3-month low.
According to the PMI compiled by Markit, activity in the dominant service sector slowed from Augusts’ reading of 60.5 to 58.7 in September.
The reading was the lowest in 3-months and added to signs that the UK economy is showing signs of a slowdown.
In a PMI, any figure above 50 indicates expansion whilst one below indicates a contraction.
‘September’s PMI surveys suggest that the UK most likely enjoyed another spell of above-trend economic growth in the third quarter, but the recovery appears to be losing its legs. The pace of expansion hit a six-month low in September and is showing signs of moderating further as we move towards the end of the year,’ said Markit chief economist Chris Williamson.
Following the release of the data, the Pound fell against the majority of its most traded peers.
Against the ‘Greenback’ it made its biggest drop since September 19 and is set to make its longest losing streak since July.
More Pound (GBP) Weakness Forecast
Sterling is forecast to remain under pressure for the rest of Friday’s session as economists await the release of eagerly anticipated jobs data from the USA.
The service sector data adds to a growing list of softening releases. Earlier in the week, a PMI showed that manufacturing activity slowed to a 17 month low.
Against the US Dollar, we can expect the Pound to soften further as economists widely expect US Nonfarm Payrolls data will come in strongly.
The report is forecast to show that the world’s largest economy created over 200,000 jobs last month.
If the report comes in strongly as anticipated then sentiment towards the US currency will increase again following a recent dip after it was deemed the ‘Greenbacks’ recent rally has been overdone.
‘The Pound is being sold today, suggesting the longer-term US Dollar bull trend is slowly returning to the foreign exchange market. Pound-Dollar was sold after the UK PMI data, while forecasts for the nonfarm payrolls are upbeat,’ said Neil Jones, head of hedge-fund sales at the London based Mizuho Bank Ltd.
The Euro meanwhile is finding support after the European Central Bank (ECB) failed to announce additional monetary easing measures despite mounting concerns over the threat of deflation in the Eurozone.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6071 ,
Pound Sterling,,Euro,1.2736 ,
Pound Sterling,,Australian Dollar,1.8355 ,
Pound Sterling,,New Zealand Dollar,2.0460 ,
US Dollar,,Pound Sterling,0.6222 ,
Euro,, Pound Sterling ,0.7853 ,
Australian Dollar,, Pound Sterling ,0.5450 ,
New Zealand Dollar,, Pound Sterling,0.4886 ,
[/table]
