By Simon Eastman
Having been trading a little higher over the last few days, the pound dropped over a percent against both the euro and US dollar over Tuesday’s trade.
Early doors Public Sector Net Borrowing was released, showing a bigger than expected rise for December’s reading. Energy support schemes and an increase in debt levels, meant we borrowed £27.4 billion, nearly £17 billion more than this time last year. The markets were expecting a level of £17.75 billion, so the increase is vast and the biggest number for a December since records began.
The S&P Global CIPS services PMI figure also dropped unexpectedly from expected 49.9 to 48, showing a bigger contraction in the sector than markets predicted. The figure compared to the EU and US figures were compounded as both areas showed better than expected figures, with the EU posting 50.7, indicating the sector is growing, for the first time since June last year. These figures point further towards a UK recession, which the Bank of England predict will last throughout the year, whilst the Eurozone seems to be emerging from the pandemic in a much better position.
Overnight we had Australian inflation readings and this morning we have further UK data, with Core PPI output and the producer price index. Germany releases their IFO business climate, current assessment and expectations data, a key indicator to their economic health and the ECB holds a non-monetary policy meeting. Further worse than expected data results could well hurt the pound further, so those with sterling in hand should stay in close contact with the team here for further updates. Later this afternoon, the Bank of Canada release their interest rate decision, policy report statement and press conference, for anyone with a Loonie requirement.
Get in touch with the team today to discuss any upcoming transfer requirements.