GBP exchange rates extend losses

Sterling’s poor week continued on Tuesday, with the British currency extending losses against most the majors after the UK’s construction PMI fell well short of forecasts.

GBP/EUR dropped from €1.1323 to €1.1261, GBP/USD hit a new 3-week low of $1.3231 and GBP/AUD slid from AU$1.6997 to AU$1.6862. The pound was able to gain on the New Zealand Dollar, however, with GBP/NZD achieving a high of NZ$1.8527 after dairy prices declined at the latest auction.

What can we expect from the currency market today? Read on to find out…

What’s been happening?

Sterling spiralled lower still against currencies like the euro and US dollar as the second of the week’s UK PMI reports came in significantly below estimate.

Although the UK’s construction sector accounts for a comparatively small proportion of total GDP, the news that the Markit Construction PMI shockingly entered contraction territory in September sent the pound reeling.

The construction gauge slumped from 51.1 to 48.1 last month. An unchanged reading had been expected.

IHS Markit Associate Director Tim Moore noted;

‘A shortfall of new work to replace completed projects has started to weigh heavily on the UK construction sector. Aside from the soft patch linked to spending delays around the EU referendum, construction companies have now experienced their longest period of falling workloads since early-2013.’

A lack of influential ecostats from elsewhere meant that the latest UK developments were the driving force behind GBP exchange rate movements.

What's coming up?

Overnight the British Retail Consortium’s shop price index for September came in at -0.1% year-on-year, an improvement on August’s result of -0.3%.

Sterling’s response was muted however ahead of today’s all-important services PMI.

The services sector accounts for over 70% of total UK GDP, so an upbeat result here could help the pound claw back this week’s losses.

Conversely, if the services PMI follows the example set by the manufacturing and construction output measures and falls short of forecasts, we could see GBP exchange rates hit new multi-day and multi-week lows.

GBP/EUR exchange rate movement could also be triggered by the Eurozone’s retail sales report (with an increase in consumer spending being euro-positive) while GBP/USD is likely to respond to the ADP employment change number and the final US services/composite PMI figures.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.