Sterling recovered some of its losses yesterday from its weakening earlier this week. Following on from the best Purchasing Managers’ Index (PMI) manufacturing in two years, the service sector data declined in pace but surpassed expectations. The latest findings suggest that the sector has regained a modest pace of growth since the EU Referendum vote. Due to the fact that the service sector accounts for roughly 70% of the economy, this cast doubt on the need for more stimulus action from the Bank of England (BoE).
Sterling weakness has largely been due to the uncertainty surrounding the plans to evoke Article 50 by the end of March next year, and the impact of this on the UK economy. After seeing the currency trading at a 31-year low against the US dollar, there are fears of a ‘hard’ Brexit. This uncertainty is likely to continue until we see a clear defined path not just from the UK but on how this lands with its trading partners.
The day ahead is fairly quiet in terms of data releases form the UK, with talk of Brexit likely to dominate the airwaves.