Sterling hits a new low against the Dollar [Video]
|Today's Highlights
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Sterling hits a new low against the Dollar
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Theresa May warns Bank of England (BoE) not to loosen monetary policy further
FX Market Overview
The Pound struggled again yesterday across the board. The UK service sector Purchasing Managers' Index (PMI) didn't help, coming in at 52.6, which was better than the 52.1 forecast, but still worse than the previous level of 52.9. As a result, Sterling plummeted to a five-year low versus the Euro to 1.1300 and GBP/USD dropped to the worst rate since 1984. The Pound weakened to such an extent that the UK has now dropped a place on the list of the world's largest economies, into sixth place, behind France.
French, German and Spanish PMI figures all came out worse than forecast and only Germany improved. There was also little mention of the Deutsche bank. Theresa May, however, managed to provide some relief for the Pound during her speech to the Conservative Party Conference yesterday. She produced a strongly-worded attack on loose monetary policy, claiming that "people with assets have got richer, while people without have not". This has been seen as a bold warning to the Bank of England (BoE) not to loosen monetary policy further. Even though the BoE operates independently from the Government, markets are nonetheless viewing May's words as having complicated any plans for further easing.
In the US, ADP Non-farm Employment data came in lower than estimates at 154k for September, dampening optimism over the health of the labor market. ISM Non-Manufacturing came out much better than expected, at 57.1 from previous 51.4 to further damage GBPUSD.
Today is very light for economic data. We've had German Factory Orders out already this morning – better than forecast at 1%. Later, EU Retail PMI, followed by an ECB Monetary Policy Meeting and US Unemployment Claims data in the afternoon.
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