The pound made gains against the euro on Tuesday after UK Services Data rose more than expected in October but fell against a broadly stronger dollar. Bank of England policymakers are expected to hold interest rates unchanged at tomorrow’s meeting. Analysts believe that the Bank’s next move will likely be a cut rather than a raise based on weak economic data.
UK Services PMI rose to 50.0 in October from 49.5 the month before, slightly above market expectations of 49.7. Despite the 50.0 level signalling zero growth in the output from the services sector, it marked an important improvement on September's reading which was the lowest since the global financial crisis of 2009.
Investors will wait for a clearer picture on how the UK’s general election will unfold before taking any strong bets on the pound. Current polls would indicate that the most likely outcome is a majority for the Conservative party.
GBPUSD touched a morning high of 1.2911 but retreated in the afternoon to a low of 1.2862 as the London session finished.
GBPEUR opened at 1.1581 and after dropping initially to a low of 1.1572 rose for the remainder of the day to reach a high of 1.1645 shortly after close.
The dollar made gains against its safe haven rival the Japanese yen on Tuesday as investors continued to be optimistic about a trade deal between the US and China. The dollar rose 0.12% against the yen and 0.2% against the Swiss franc.
The US trade deficit narrowed to $52.5bn in September from $55bn last month in line with market expectations. This was the lowest trade gap since April after a fall in in imports from Germany and China and US reporting first petroleum surplus since 1978. Exports declined 0.9% but this was surpassed by a larger 1.7% fall in imports. US Non-Manufacturing PMI rose to 54.7 in October from a near three-year low of 52.6 last month, above market consensus of 53.5.
EURUSD fell throughout the day from a high of 1.1136 at open to eventually reach a near 3-week low of 1.1062.
