British Pound Jumps on Services PMI
The British pound stays the strongest major currency after UK Services PMI data. Markit’s latest UK services sector purchasing managers’ index (PMI) report smashed expectations by printing at 54.0 in May, up from the previous score of 52.8 and the forecast of 53.0. This marked a continued recovery from the lows struck in March when the economy was hindered by a major seasonal slowdown due to bad weather. It is also an important indicator of UK economic activity simply because the services sector accounts for close to 80% of the gross domestic product.
The euro weakened due to disappointing data on business activity in the private sector of the euro area, as well as under the pressure of the political situation in Italy, where the Italian parliament must pass a vote of confidence to the new prime minister today. Further attention of investors will be attracted by the release of data on the ISM business activity index in the US services sector.
The Eurozone PMI services was finalized at 53.8 in May, revised down from 53.9, vs April’s 54.8. PMI composite was finalized at 54.1, down from April’s 55.1, hitting one-and-a-half year low. Eurozone retail sales rose 0.1% mom in April, below expectation of 0.5% mom.
Italy services PMI rose to 53.1 in May, up from 52.6. France services PMI was finalized at 54.3, unrevised. Germany services PMI was finalized at 52.1, unrevised.
RBA left the policy rate unchanged at 1.50% as expected, and made no change to the monetary policy guidance. The central bank remained confident over the global economic outlook. The Australia’s central bank also expects growth to pick up and average a bit above 3% in 2018 and 2019.