Yesterday we got the strongest indication yet of the ongoing impact of the Brexit on UK economic confidence as the Construction PMI sentiment figure for July tanked to its worst level since 2009. The figure of 46.0, well below 50, indicates expectations for the sector are now in contraction. The market will eagerly await the further readings for Manufacturing and Services sectors throughout this week. Overnight we had the Reserve Bank of Australia keep interest rates on hold citing that it would be ‘prudent’ to hold monetary policy steady at the moment. Although downplaying the global impact of Brexit and ignoring the possible fallout from Saturday's Australian election he did leave the door firmly open for another possible rate cut in the current cycle.
In the markets, the Pound was relatively stable throughout Monday although opened overnight lower in anticipation of today’s events including the comments from the BoE governor.
The main focus of today is on the UK with key data releases and comments from the Bank of England. At 09.30 we have the UK Services PMI number which will be closely scrutinised to see if it mirrors yesterday’s sharp slump in Construction PMI. With Services being the main part of the UK economy, this is an important reading. Later on in the morning we have the UK central banks Financial Stability Report and an accompanying press conference with Governor Mark Carney. This will be the second substantive comment from Carney since the Brexit vote and we would expect this to be the main focus of the report. The report is released at 10.30 with Carney himself speaking at 11.00. The rest of the day is comparatively light with the only action of note FOMC Member and Federal Reserve Bank of New York President William Dudley, speaking at 19.30 UK time.
We expect another tough day for the Pound.