Sterling fell against the Euro on Wednesday following the release of the CIPS manufacturing PMI data at 09:28 GMT+1. The PMI index fell to 52.1 from an already unimpressive figure of 54.4 in April, this bolstered views that the struggling UK economy would keep interest rates at the current record low.
Adding to the Pound’s negativity was data showing UK mortgage approvals for April which unexpectedly fell to the lowest they’ve been since December 2010. Analysts have said that the Bank of England is very unlikely to raise interest rates whilst the UK economy continues to struggle.
Most of the economic data out recently has been relatively poor, adding no strength to the already faltering Pound. The negativity surrounding the UK is making it much more difficult for traders to think that the Bank of England will raise interest rates in the short term.
Further losses to the Pound were seen yesterday as negative comments from a member of the monetary policy committee regarding interest rates saw traders sell off the UK currency. The Euro rocketed against the Pound pushing below 1.13, over 1.5 cents lower than we were towards the beginning of the week.
Sterling took a dive against the US Dollar, falling from 1.65 seen on Tuesday to less than 1.64 where it remains currently, most of the weakness that has been seen today was the remains of the scarring from Wednesday’s terrible PMI report showing the slowest manufacturing growth since September 2010.
Eyes now turn to the UK CIPS Services PMI for May which is due this morning, the soft numbers seen recently from other economic data will not be welcome here as the services sector makes up 70% of the UK economy, a poor result at 09:28 GMT+1 will see the Pound fall further against the Euro.
Traders are equally expecting further US Dollar weakness on the release of the key US non-farm payroll report which is released in the afternoon. The US Dollar is likely to weaken if the payrolls are up and improved risk sentiment across the market will help riskier currencies.