UK Services PMI takes a sharp hit - kneejerk hit on GBP short-lived (for now)
This morning's UK services PMI is significantly lower than expected at 50.4. Markets were looking for a modest upturn from 52.2 to 52.5, yet this figure not only misses by some way but also teeters on the edge of contractionary territory. The index shows ongoing expansion in the sector above 50.0, while anything below reflects a slowdown and contraction in activity.
We saw Cable snap back to 1.2715 or so, though as we noted in the earlier comment, the data is of little consequence at the moment as traders look for signs of any sea change in the Brexit view within parliament at least. As we also noted, the Commons voted in favour of having a say in the withdrawal plans if next week's meaningful vote fails to back the PMs plans, and the chances of the UK canceling Brexit have risen and this is reflected in the higher levels seen this morning.
There is, however, a long way to go before GBP can emerge from the woods, and this morning's release of the full legal advice document from the Attorney General is the next focal point, which will put more colour on the likelihood of how next week's vote could go - at present unlikely at best.
EUR/GBP is still holding off the resistance seen above 0.8900, while Cable is still trying to make a little more ground on the upside, though we still expect there to be strong resistance if we get anywhere near the 1.2800 mark.