FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the main economic surprise yesterday was the release of the weaker than expected UK services PMI survey for September which revealed that business confidence in the service sector continued to decline more sharply than expected by 1.9 point to 53.3 in September reaching its lowest level since April 2013, suggesting that the economy is losing its growth momentum.
Key Quotes
“The service PMI has declined for three consecutive months by a cumulative total of 5.2 point. The survey signals that the robust pace of growth in the UK over the last couple of years has eased to a moderate expansion in the near-term.”
“Markit stated that the survey provided more evidence that weakness was spreading from the struggling manufacturing sector, consumers are becoming more cautious, and that global economic worries and financial market jitters have weighed on business confidence.”
“At current weaker levels the UK economic soft patch already appears to be well priced into the pound which dampened the negative hit to the pound yesterday from the material downside surprise from the service PMI survey.”
“We remain optimistic that the soft patch could prove temporary as the UK consumers are still supported by rising wage growth and low energy prices while productivity growth has shown signs of picking up recently.”
“We had expected growth in the UK to be less effected by slowing growth overseas given favourable conditions for domestic demand. The weaker services PMI survey clearly casts doubt on that more optimistic view posing downside risks to our outlook for a stronger pound. The pound has already weakened materially helping dampen further downside in the near-term.”
(Market News Provided by FXstreet)