Poundsterling
The Pound advanced further against some of the majors yesterday as traders reacted to another shamelessly high
UK PMI figure. Completing the tripartite of outstanding data, the
Service Sector PMI came in at a fresh 6-year high of 60.5 for August, beating expectations of 59.0 and improving slightly on July's score. The most optimistic Services report since December 2006, was littered with multi-year highs: New Business increased at its fastest rate since
Tony Blair was voted into 10 Downing Street in May 1997, and the overall
Composite PMI result - which measures private sector output across the whole economy - reached the highest score since records began in 1998.
Following three straight months of glittering Purchasing Managers Indexes all around, markets are now increasingly hopeful that interest rates will be raised at some point in 2015 - a year earlier than the Bank of England currently intends to act. It is now possible that British GDP will double the BoE's forecast in the third quarter, possibly registering growth above 1.0%.
Euro
Sterling bullied the Euro to a fresh 3.5-month high yesterday in reaction to the outperforming British Services Industry print. The Eurozone registered a robust PMI print of its own, but it was never going to compete with the stampeding UK figure. The 17-nation bloc Composite index advanced to a 2-year high of 51.5, slightly worse-than-expectations but still mightily encouraging, as three of the currency bloc's largest economies posted multi-month highs.
The single currency was also supported by news that Eurozone growth was confirmed at 0.3% for the second quarter, officially marking the end of its 1.5-year recession. However, sentiment towards the common currency was hampered by a disappointing Retail Sales print of -1.3% - even lower than expectations of -0.3%.
Political developments also worked against demand for the Euro yesterday, as new polling data showed that Angela Merkel's support in the run-up to this month's election is waning. The Italian government also ran into some trouble as colleagues of Silvio Berlusconi intimated that the former Prime Minister, who has recently been banned from office on tax fraud charges, is planning to pull-out of Enrico Letta's ruling coalition party.
US Dollar
The Pound to US Dollar exchange rate climbed higher by around 0.65 cents to a fortnightly high yesterday on the back of the latest in a long run of decent UK PMI data. The US Dollar was mildly weakened by a below-par Trade Balance report. The US Commerce Department reported that the trade deficit widened from $34.5 billion in June to $39.1 billion as the gap between the US and its two largest export markets, China and the European Union, stretched to new all-time highs. Essentially, US exports are being overshadowed by imports, perhaps indicating that the recent Fed-taper-resultant US Dollar rallies have made American goods slightly more expensive, and therefore slightly less appealing, to international buyers.
source:torFx
