Written by Philip McHugh
The pound tumbled to new multi-month lows on Monday as it continued to be pressured by Bank of England (BoE) interest rate cut speculation.
Sterling is trading sideways so far this morning, with GBP/EUR stable at €1.1594 and GBP/USD subdued at $1.2343. GBP/CAD is rangebound at CA$1.6915, while GBP/AUD and GBP/NZD hold steady at AU$1.9133 and NZ$2.0874, respectively.
Coming up, will a slowdown in UK service sector growth pull the pound even lower today?
What’s been happening?
The pound got off to a poor start this week, with GBP/EUR sliding to a three-month low and GBP/USD refreshing a five-month low.
The Sterling selling bias remained in place as investors continued to price in a Bank of England interest rate cut for August.
The US dollar, meanwhile, trended broadly higher on Monday, buoyed by an uptick in US Treasury yields, amid growing bets the Federal Reserve will now only deliver a single interest rate hike in 2024.
However, the upside in the US dollar remained capped, as cooling tensions in the Middle East tempered safe-haven demand.
Finally, the euro faced resistance yesterday, following a smaller-than-expected improvement in Eurozone consumer sentiment.
What’s coming up?
Turning to today’s session, the focus is likely to be on the latest preliminary PMIs from the UK and Eurozone.
The Sterling selloff may be extended in the wake of this morning’s data as it is forecast to report another moderation of growth in the UK’s vital service sector.
GBP investors will also look to speeches by BoE policymakers Jonathan Haskel and Huw Pill for direction today. If they echo the dovish tone struck by their colleagues last week, then the pound could test new lows.
In contrast the Eurozone PMIs are expected to show that activity in the bloc’s private sector remained positive in April, after returning to growth for the first time in ten months in March.
Meanwhile, across the Atlantic, this afternoon will see the publication of the S&P PMIs. While not as influential as the ISM releases, they could still provide a boost to the US dollar if they report an uptick in private sector growth.
