GBP: yet another lower-than-forecast set of economic data weighs on sterling

On a relatively quiet trading day due to Independence Day in the US, we saw sterling continue to track slightly lower. The move was data-driven as the construction purchasing managers’ index showed that activity in the sector had slowed.

Whilst the sector still grew at a healthy pace, the survey does show that optimism has waned somewhat. Sterling weakened only slightly because the construction sector accounts for just 10% of the UK economy.

However, the UK’s dominant service sector is due to release its Purchasing Managers Indices (PMI) data today, which could have a far greater impact on the pound.

The service sector PMI is expected to post a reading of 53.6, down from 53.8 last month. A reading above 50.0 indicates an expansion, whilst below indicates contraction. If this comes out as expected it will echo the same sentiment as the construction and manufacturing data – waning optimism.