Data released from the Confederation of British Industry (CBI) over the weekend showed its monthly growth index for February had hit its lowest level in almost six years. Again, this indicates that businesses aren’t investing amid Brexit uncertainty. This theme is likely to be repeated with the release of the influential UK Purchasing Managers’ Index (PMI) figures over the coming days. Any indication of contraction—a reading below 50.0—could leave Sterling under pressure.
Talk of a boost to public sector spending after Brexit has been side-lined, in part owing to the potential extra costs associated with a no-deal scenario. However, MPs may have an added incentive to approve the standing deal on the basis that the Chancellor of the Exchequer could confirm how any Brexit dividend would be spent next week. In the wake of record tax receipts in January, this would convey an important message of confidence over the health of the UK economy after leaving the European Union, providing support for the Pound in the medium-term.
Despite some volatility over the weekend break, the Dollar has marginally gained against the Pound. This week’s UK PMI data has the potential to heap further pressure on Sterling if there are any suggestions of economic contraction.
The Euro has continued to trade sideways despite disappointing US economic data on Friday and Donald Trump’s latest veiled attack on Federal Reserve Chief Jerome Powell over the weekend. Expectations over the European Central Bank’s (ECB) meeting later this week will likely continue to drag on the Euro.
The Pound is finding renewed support in early trade despite the weekend’s disappointing economic news. Optimism over Brexit may be helping here, along with the possibility of news of stimulus measures from the ECB later in the week.