Sterling suffered further losses against the US dollar on Wednesday, as the ADP employment report showed the highest level of job increases since January. In the wake of this news, sterling reached its lowest level since mid-June – and further away from the 7-month highs seen near the end of May. With further positive US economic data expected over the coming weeks, we could be seeing the start of a re-adjustment in this price.
Against the euro however, sterling saw a much quieter day as investors kept their cool over the Greek debt crisis (even though the UK was experiencing the hottest July day since records began). Signs of progress between Greece and her creditors were seen yesterday, with Greek prime minister Tsipras reportedly willing to compromise on many of the areas outlined by their creditors. However, with Tsipras later urging the Greek people to reject austerity measures in Sunday’s referendum, the situation remains finely balanced – meaning we could still see significant movement for sterling.
Also we had the releases of June’s purchasing managers index for UK manufacturing yesterday. This was similar to last month which disappointed as expectations were for an improvement. The main reason given was a lack of orders from Europe which presumably is a function of the high value of sterling relative to the euro making UK exports more expensive.
Today sees the release of sector growth data from the construction industry; following robust growth in the sector over recent months, we expect to see a further strong reading here. More attention will likely be paid to the release of employment data from the US in the afternoon, and European Central Bank president Mario Draghi speaking in Milan.