020 7898 0500Data from the UK was less than favourable this week which saw sterling weaken slightly. Uncertainty about the course of Brexit didn’t help.
Starting with the political backdrop, the week started on the back foot as reports over the weekend suggested that Prime Minister Theresa May’s team is preparing for the possibility of Scotland calling for another independence referendum. This news came from an unidentified government source and if this does indeed prove to be true it will only heighten the uncertainty surrounding sterling.
The House of Lords threw a spanner into the works with regards to Article 50. Peers defied the government by voting 358 to 256 to guarantee the rights of European Union (EU) nationals living in the UK after Brexit. This will probably delay the trigger of the bill and could force further amendments. Yesterday it was then revealed that Gina Miller (the individual that brought the lawsuit that forced parliamentary approval for the government Brexit plans) is considering another legal challenge. Ms Miller argues that Parliament should be given a full vote on the final deal for the UK to leave the EU. The ongoing political uncertainty will weigh on sterling.
Meanwhile, economic data was soft and helped push sterling to a six-week low against the dollar. The Purchasing Managers Index (PMI) for manufacturing came out and reported a figure below expectations, a disappointment to sterling. Growth continued in the construction sector but a slowdown in new orders and soaring costs added to mixed signals for the economy.
Looking ahead to the final trading session of the week, we have a key figure for the UK economy in the form of the PMI services. The robustness of the economy has come into question over the last few weeks as retail sales posted back-to-back negative numbers and the gap between inflation and salary growth narrowed. This will be a key indicator for UK growth and momentum moving forward.
