The UK’s February services PMI undershot expectations with a headline reading of 53.3, which indicates a deceleration in the pace of expansion in the sector following January’s 54.5 reading. The median forecast had been for a more modest decline to 54.0. Amid the breakdown of the survey, the new orders reading fell to 54.7 from 55.9, while prices shot to an eight-and-a-half-year high of 66.4, up from 65.0 in January. The composite reading worked out at 53.8, falling from January’s 55.4 figure and was contrary to the Bloomberg median forecast for an increase to 55.6. Markit, the compiler of the PMI surveys, described the UK economy as “losing momentum,” with businesses reporting that a squeeze on consumer inflation-adjusted income growth is feeding through to a slacking in demand. Eurozone
The pound dove on the UK services PMI miss, shedding about 30 pips versus the dollar in the immediate wake of the data release, which was sufficient to carve out near-seven-week low at 1.2223. Sterling also clocked a 24-day low versus the euro and a two-day nadir against the yen. We are now into March and the negotiations to leave the EU are now firmly in the cross hairs and there will be the inevitable stumbling blocks as there always is in any negotiations. At these levels Sterling will look attractive, with many claiming it is fundamentally undervalued, however, I remain bearish for sterling and Cable in particular; we are now closer to 1.2000 than 1.2500.
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