The trend of disappointing UK data continued yesterday with the Construction PMI not meeting market expectations. The consensus was for the Construction figure to remain constant at the 54 mark, but it fell to a reading of 52 as business activity expanded at its slowest pace since June 2013. As a result, the Sterling was under pressure and fell lower against the Dollar and the Euro. As concerns for the looming EU Referendum also weighed on the Pound yesterday, results from the ICM’s weekly online poll showed that the vote to leave the EU was ahead with around 45% of voters in favour of leaving and 44% believing Britain should stay. No doubt volatility will continue to be seen as result of this.
Across the Atlantic, the US was in the spotlight as they released the ADP Employment figure. This private reading of job gains is viewed as a pre cursor for the NFP Employment figure released at the end of this week. Expectations were for 195k jobs to be added, however the Dollar found itself once again on the back foot as the report only showed that 156k jobs were added. This links further to the main labour data figures from Friday, which saw the Dollar retreat as markets became more bearish on the US economic outlook. Expectations of a rate raise four times this year have already diminished to possibly two rate raises. Therefore, as data releases are not meeting forecasts, the potential of any increase in rates falls further off the table for the Fed.
Today, the main attention will be on the UK where markets will look to see if the Services PMI follows the trend and falls below the expected 53.6. A bad reading is also expected to be released for the services sector which equates to around 80% of the UK’s GDP figure. If this is the case, it will no doubt see a bout of further Sterling weakness. It is likely that a bullish figure could see the sterling buyers back in force.