USD’s rally takes a pause, while riskier assets are modestly rising.
British services surge speeds down to 7-month minimum
In Britain’s dominant services sector, business activity speeded down to a seven-month minimum in October, and companies’ expectations for the coming year are the worst since the 2016 Brexit vote. That’s what a key poll disclosed on Monday.
In October, the IHS Markit/CIPS purchasing managers' index hit 52.2 in contrast with September’s reading of 53.9, which is its lowest value since March’ unusually icy weather as well as a bigger economic dive than market experts had foreseen in a Reuters survey.
Businesses' hopes for stronger activity over the next 12 months turned out to be the most downbeat since July 2016, exactly when they briefly reached a post-financial downtime minimum after the vote to break up with the European bloc.
The downbeat service sector numbers bring evidence that Brexit fears are putting more pressure on the British economy, as some experts pointed out.
Theresa May, UK Prime Minister has yet to agree a withdrawal pact with the European bloc in order to ensure services, products as well as employees will keep crossing borders after the United Kingdom finally leaves the EU on March 29 2019.
UK companies also posted headwinds from a decelerating global economy, financial market turbulence as well as trade tensions.
The previous week the Bank of England predicted that the UK’s rate of economic surge would halve to about 0.3% in the final three months of this year from an estimated 0.6% in the third quarter of 2018.
However, the dismal services data showed up after the worst manufacturing PMI since the Brexit vote.
As a matter of fact, the two PMIs along with firm construction data, appear to be the weakest since March, pointing to quarterly surge of up to 0.2% if the situation doesn’t get better, as experts explained.
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
S&P 500 skyrocketed to the all-time high on optimism that Biden’s fiscal stimulus will support economic growth and boost corporate earnings.
PMI reports from the EU, the UK, and the USA will be released during the day!
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.