Sterling falls on signs of slowing economy

It looks like the Pound’s rally has finally run out of steam. A significant rise throughout the year so far has seen GBP/EUR rates reach as high as €1.17+ which is the best we have seen in over 21 months. However this week we have seen Sterling level off, dropping into the mid €1.16’s.

It’s uncertain whether Theresa May will be able to get her deal through parliament later this month, so any further gains for the Pound will likely await the next round of voting in mid-March. Until then, in the absence of any Brexit news, investors will be focusing on economic data and it’s this that will drive the Pound over the course of this week.

What economic data could affect the Pound this week?

Already this week we have seen the UK construction sector show signs of contraction after posting poor figures. Later this morning at 09:30 am we will see the latest Services PMI data. Services form a huge part of the UK economy and so the release could have an impact on GBP exchange rates. The expected result is around 49.9 (anything above 50 indicates growth, anything below indicates contraction). If the number is lower than the expected the Sterling will fall. A higher number should cause gains for the Pound.

Elsewhere we have speeches by Bank of England members this week that could also affect the Pound. On Thursday, we have the latest ECB interest rate decision. The EU economy has been slowing recently and if the ECB hint at further stimulus measures, it could weaken the Euro and keep GBP/EUR rates supported. On Friday, GBP/USD could be affected by the latest US jobs numbers.

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