Yesterday's UK services PMI data yielded few surprises - with cost pressures showing little signs of abating and operating expenses rising, output dropped to levels last seen in January 2021.
So it didn’t come as a shock to see a weakening of the pound against the US dollar.
GBP/USD fell 0.8% to 1.219 in Monday’s session, and continued to fall another 10 pips this morning.
GBP/USD contracts, but it could be a short-term price movement – Source: capital.com
But the pair is unlikely to remain in a downward trend. Although the US dollar index (DXY) rose in the last session, in part due to a surprisingly strong US services PMI reading, the index is on a bearish course in the long run.
A black Friday boost saw a 4.1% jump in monthly UK retail sales in data released this morning, which has already proved a catalyst for gains against the greenback.
Sterling took less of a hit against the euro. While EUR/GBP rose 0.4% to 86.08p on Monday, the pair has since cut back to 85.97p in today’s Asia trading window.
The pound is also looking strong against the yen, having already jumped 0.6% to 167.47 in the GBP/JPY pair this morning.
Greenback’s solid performance in the past couple of days has caused EUR/USD to edge back from its recent five-month high, with the pair dipping 0.45% to 1.049 yesterday and continuing the trend downwards to 1.047 in today’s Asia trading hours.