Upbeat UK Services Data… No Rate Cut From the BOE Then

Posted Thursday, November 3, 2016 by
Skerdian Meta • 2 min read

The data's biggest and most important sector of the UK economy, the service sector, just released the data for October and it was impressive. The UK Markit services PMI was expected to come out at 52.4 but the actual number is 54.5. 

Don´t forget that the service sector makes up about 70-75% of the country´s GDP, so whichever direction this sector is headed, that will be the direction of the entire economy. Judging by the main headline number and considering that this indicator for the service sector in most of the developed economies stands around 52-52, we can say that the UK economy is doing just fine.

It seems like the post Brexit referendum fears have completely disappeared as the UK economic activity climbs up where it was before the referendum. The Brexit hiccup only lasted about a month and it was isolated in the business side of the economy only, but I guess the firms quickly realized that for the time, being Brexit won´t have any impact on the British consumer. Thus, the business activity is back to normal.

However, let´s have a look at the details.

The composite and new orders climbed higher to 54.8 points and 55.7 from 53.9 and 53.7 respectively in September, while the input prices surged from 58.9 to 64.9. That´s a huge jump in the prices, but it´s obvious that it comes from the weak Sterling.

So, the UK service PMI data is pretty good and looking at the details, the components are quite upbeat too. Despite the fact, the reaction in GBP pairs was muted. In fact, GBP/USD lost a few pips after the release. I guess that the positive service PMI numbers remove any doubt for a possible interest rate cut from the BOE (Bank of England), which is about to hold its meeting in a couple of hours.

That said, GBP pairs have just jumped more than 100 pips and I cant´s see why. Let me just have a look around and get back to you ASAP.

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