USD’s rally takes a pause, while riskier assets are modestly rising.
Decelerating British services surge raises questions over BoE rate lift
In July, a surge in UK services companies speeded down by much more than anticipated, thus raising questions as for the BoE’s intention to have interest rates lifted, according to a poll uncovered on Friday.
In July, a closely-watched indicator of economic activity, the PMI index slumped to a three-month minimum of 53.5 in contrast with June’s outcome of 55.1.
Although staying above the 50 mark that stands for a surge, July's score turned out to be weaker than all estimates in a Reuters survey of more than 30 market experts.
A number of companies in the poll attributed the deceleration to a summer heatwave as well as the soccer World Cup that kept British customers away from their businesses.
There were also indications that uncertainty as for Brexit had restrained new business.
The poll showed up just a day after Britain’s key financial institution had interest rates increased to a fresh post-financial downtime maximum of 0.75% due to the fact it took the view that the UK economy had managed to recover momentum after a poor start to 2018 provoked by unusually bad weather.
UK business groups heavily criticized the given decision, and Friday's PMI can hardly soothe their worries.
In July, the service sector got back to the slow tempo due to the fact that business activity surge lost momentum for the first time since the beginning of spring, as some financial analysts pointed out.
In July, services companies hired personnel at the weakest tempo for two years.
Tight labor market conditions, as well as soaring wage pressures, also appear to be a major challenge for UK service sector companies that c since August 2016 contributed to the slowest tempo of job creation.
The Bank of England has told it actually expects wages to edge up faster, thus ramping up inflationary pressure.
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.
The market optimism waned amid stricter restrictions to control rising coronavirus infections. S&P 500 and Nasdaq dropped from the all-time highs, while the USD jumped higher.
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!