UK Services PMI Preview: A temporary distraction from Brexit for GBP/USD, but probably no relief


  • Markit's Services PMI will provide a snapshot of how businesses are feeling about Brexit. 
  • Data usually has a short-lived effect when Brexit is left, right, and center.
  • GBP/USD may drop if the data disappoint.

Markit releases its Purchasing Managers' Indicator for the Services sector on Wednesday, April 3rd, at 8:30 GMT. The sector is the UK's largest and includes the all-important financial services. The publication tends to have a significant impact on GBP/USD at reasonable times.

These are not normal times, as Brexit is just around the corner, just nine days after the data is due. Every minor Brexit headline rocks the pound, while data has a limited impact in both the price action and the time it affects Sterling. 

Expectations

In February, the score was 51.3 points, hardly above the 50-point threshold that separates expansion from contraction. A similar level, even closer to 50, is due now: 50.9 according to the economic calendar

The Services PMI is the third and last one. Manufacturing PMI beat expectations with 55.1 points, better than had been anticipated. However, a closer look revealed that it is mostly due to stockpiling in fear of a hard, no-deal Brexit. The Construction PMI met expectations with 49.7 points, just below the 50-point threshold. 

The British Chamber of Commerce (BCC) said that the ongoing impasse in Westminster is already taking its toll, contributing to a "sharp slowdown in the real economy." In their quarterly report, they singled out services sector firms, saying that "a rise in export sales at its lowest level in a decade."

Scenarios

Therefore, a drop below 50 cannot be ruled out, and it could find markets unprepared. In this situation, GBP/USD has room to the downside. An indication of contraction in the largest sector is already worrisome enough to move the pound beyond the limited and short-lived reactions it experienced recently in response to data. 

A score of around 51 or even as high as 54 might have the regular short-lived, limited impact. Only a level above 55, which is quite unlikely, could send Serling higher for more than a short while. 

All in all, the Services PMI data could serve as a distraction from Brexit, but more likely than not, an adverse one. 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

AUD/USD rises above 50-HMA, bull reversal in the making?

The sell-off in AUD/USD seems to have run out of steam, courtesy easing RBA rate cut expectations after upbeat Australian CPI data. The pair trades above the 50-hour average. A close above 0.6765 would confirm a bullish reversal candlestick pattern on the daily chart. 

AUD/USD News

USD/JPY holds the higher ground above 109.00 ahead of Fed interest rate

USD/JPY trades firmer within a familiar range around 109.20 region, as the bulls benefit from a better market mood despite the ongoing China coronavirus crisis. All eyes remain on the Fed interest rate decision for fresh direction.

USD/JPY News

Federal interest rate preview: Stable policy and an uncertain future

The course of the American economy has not altered since the previous FOMC meeting on Dec last year. 4Q growth is expected to be 2.1% when the preliminary figures are released by the Bureau of Economic Analysis on Thursday.

Read more

Gold: Bulls looking for a discount in $1560s

Gold top in the making with a weekly shooting star and weekly divergence. The price of gold has been found floundering between 1580 and the 1560s following a surge at the start of the year to the highest levels since March 2013 at $1,611.

Gold News

GBP/USD: 1.3080 questions break of short-term falling trendline

GBP/USD trades near 1.3025 during the early Wednesday’s trading session. The pair recently broke a three-day-old falling trend line but is still to cross the near-term key resistance confluence.

GBP/USD News

Forex Majors

Cryptocurrencies

Signatures