Sterling continued its downward trend on Tuesday across the board as the services sector posted the lowest growth figures seen since May 2013. The Purchasing Managers’ Index (PMI) – which is a measure of growth – slipped to 55.8 in December, missing the forecast of 58.2 by some margin. With the services industry forming the backbone of the UK economy, sterling fell to a fresh 17-month low against the US dollar on the back of this data, and slid to a 3-week low against the euro. This news follows confirmation that performance in both the construction and manufacturing sectors slipped throughout December. The worry is that the December figures are not an aberration but the start of longer term weakness in the UK economy which strengthens the view that UK interest rates will remain low until at least late 2015.
Today sees a relatively quiet day for the UK, with only Halifax housing inflation data released this morning. European inflation figures and the release of minutes from the latest Federal Open Market Committee (FOMC) meeting in the US look set to be the most eagerly followed events of the day.