The UK’s tertiary sector is shrinking at its fastest pace in seven years, following the EU Referendum results. The UK’s biggest contributor to GDP, Services PMI, reached economists’ forecasts at 47.4. However, this reading indicates that the sector continued to drag its feet in contraction territory. The gauge hasn’t been this weak since March 2009 and will likely add further stimulus for the Bank of England to cut rates this afternoon.
Across the pond, the US released the ADP Non-Farm Employment Change figure. The reading improved, registering at 179k. This showed that the labour market was stable despite the fact that broader growth numbers indicated a slowing economy. Friday’s Non-Farm pay roll figure will be the key driver for the near term trend of the Greenback. If the reading registers north of the bullish 200k mark, we will see considerable Dollar strength. Markets are expecting the Non-Farm pay roll figure to register at 180k, nearly 100k lower than July’s seven month high.
The biggest event risk of the week is scheduled this afternoon as the Bank of England meet to decide on the interest rate and QE program. The markets are anticipating the central bank cutting rates from 0.5% to 0.25%. After the UK voted to leave the European Union two months ago, business and economic data has declined significantly. Markets will also analyze Mark Carney’s statement to determine whether the BoE will implement any sort of QE to support the now uncertain economy. High levels of volatility are therefore expected during the course of the day.