Earlier in the week we saw the Purchasing Managers Index (PMI) numbers for manufacturing and construction impress. Yesterday the dominant service sector posted some impressive figures and since this sector accounts for over 70% of Gross Domestic Product (GDP), this figure is always watched more closely. Once again defying Brexit, data showed that the service sector grew at its fastest pace for 17 months.
Based on the numbers this week a hike would be more appropriate than a cut in interest rates, but given the uncertainty of Brexit, growth this year is nevertheless expected to slow. There is some speculation that retail activity was driven by the desire to obtain high-value goods before new year price hikes from many retailers. The Bank of England (BoE) will take the current data run with a pinch of salt and, while being impressed by it, they will also be concerned about the uncertain road the UK is to take.
The reaction from sterling echoed this sentiment as the currency failed to make gains on its release. Sterling pushed higher against the Greenback later in the day, however, as the US ADP Employment report missed its forecast ahead of the all-important Non-Farm Payrolls today.
Limited UK releases today and the main focus will be on US data.