During the first part of yesterday sterling dropped to its lowest level in almost a year against the US dollar. This followed the release of a survey of purchasing managers which showed growth in UK services had slowed to its worst level in 17 months. The official statistics from Markit Economics stated that its Purchasing Managers Index (PMI) for services fell to 56.2 in October, down from Septembers figure of 58.7, and well below expectations of 58.4. The only solace to be taken from the data is that the UK services sector is still expanding as the figure is over 50. The only data that has impressed so far this week were the PMI figures for manufacturing released on Monday.
Looking to today, sterling has a busy day with Housing Index and industrial production data both due first thing this morning. More significantly, we have the UK Official Bank rate announcement at midday, which is expected to be kept at 0.5%. Any change from expected will be a real shock and cause major movements in rates.