GBP Will be Doomed if UK Services Fall Into Contraction Today

Posted Thursday, October 3, 2019 by
Skerdian Meta • 1 min read

The UK is in a very difficult position. The country is divided on Brexit, politics are a mess and several sectors of the economy are in contraction. In Q2, the GDP contracted as well, by 0.2%, but UK might just miss recession, which would mean two consecutive negative quarters.

Even inflation has started to cool off, as we saw in the last reading. The construction report which released yesterday showed that this sector fell into deeper contraction to 43.3 points, while it was expected to remain unchanged at 45.0. This sector used to be one of the strongest historically, but it is heading into recession as well.

Services are one of the sectors which have been holding up above contraction, but just barely. The services PMI indicator stood at 50.6 points in August which is pretty close to stagnation and it is expected to cool off further to 50.3 points in September. But, after seeing sectors falling into contraction one after another all over the globe, I have a feeling that we might see a negative number today, below 50 points.

If that’s the case, then the GBP will likely turn really bearish, because this would add to the economic weakness and the negative sentiment in the UK. But, let’s see the actual numbers first, which we will cover live on our economic calendar section.

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