The Pound Sterling to US Dollar (GBP/USD) exchange rate weakened to a two-week low on Wednesday after data showed that the UK’s dominant services sector grew at a slower than forecast pace in February.
The GBP/USD Exchange Rate touched a session low of 1.5256
According to research group Markit Economics, its Services Purchasing Managers Index dropped to a reading of 56.7 in February, down from the preceding months figure of 57.2 and below economist forecasts for an increase to a reading of 57.5.
In a PMI, if a figure is above 50 it indicates expansion whilst a number below indicates contraction. Despite posting a solid figure and showing the employment rose to its second highest level on record the fact that it came in below expectations was enough to soften the Pound.
‘Data from the UK services sector remained solid in February and continued the belief that any dip in fortunes seen towards the end of last year was merely a blip. The services sector continues to add jobs, with February’s additions coming at the second highest rate on record. Higher wages are also being seen for sector participants, which is a necessary and welcome reaction to tightness in the labour market and competition between companies. Taking the recent run of PMIs together, Q1 GDP is forecasted at 0.6% with potential for an upside surprise,’ said Jeremy Cook, chief economist at World First.
The survey also showed that employment, new business and overall optimism was more positive than the headline figure.
The report adds to signs that the UK economy has gotten off to a strong start to 2015.
US Data Releases Ahead
The US Dollar is likely to experience volatility later in the session due to the publication of a number of data releases.
First up will be mortgage applications data, which is forecast to show a slight improvement.
After that, follows the eagerly anticipated ADP Employment Change report, which is expected to show that 220,000 jobs were added in February. That would compare with growth of 213,000 in December.
Finally, the Institute for Supply Management will release its service sector index. Economists are forecasting that the PMI will dip to a reading of 56.5, from the January’s figure of 56.7.
Depending on the scale of changes in those reports, investors could overlook them and instead focus on Friday’s Non Farm Payrolls data.
