Data this morning has revealed a slight fall in the UK services Purchasing Managers Index.
The index is a measure of the economic situation in Britain’s services sector. As the driving force of the UK economy, services data captures a good overview of conditions and has a substantial impact on sterling’s direction. Although today’s reading is still well above 50.0 marking industry expansion, the index fell to 56.5 in March, from 58.4 in February. This disappointed market expectations, which called for a more modest fall in activity to just 58.1. In response the market has taken the pound lower, though damage appears to be limited with the upcoming election taking centre stage at present.
Duncan Higgins, senior analyst at Caxton FX says, “The data is disappointing, but it is worth noting that its bearing on GDP is not as great as the manufacturing PMI, which showed strong improvement on the month. However, it underlines the still fragile nature of the recovery, with an improving trend in the services sector yet to re-materialise.”
The pound has dropped off by around a quarter percent against both the dollar and euro but has recovered some of those losses.
“The market at present is preoccupied with the upcoming election and developments from the eurozone. Over the next few weeks, sterling’s movement will be predominantly dictated by the opinion polls, with economic figures taking a bit of a back seat,” continues Higgins.
At present the pound is slipping further from €1.14, having touched 1.1412 earlier this morning. Against the dollar, sterling is holding above $1.52, half a cent down on the day.
