The data provider’s UK service sector Purchasing Managers’ Index (PMI) slipped to 62.4 from a 24-year high of 62.9 in May. Despite the slight decline, the reading still shows a strong rise in inactivity. Another sharp rise in new orders triggered the biggest jump in staffing levels across services firms in seven years – both new hires and workers returning from furlough. The surge in demand for consumer services was attributed to easing lockdown restrictions and increasing business investment in response to economic recovery. However, staff shortages and other constraints caused work backlogs to rise at the fastest pace since the survey began 25 years ago. Input costs and the prices charged by services firms also rose at a record pace under the influence of higher wages, increased raw material prices, and growing transportation charges.
The pound vs dollar rate edged higher following the release, as the investors took confidence in the UK’s economic outlook. By this morning, the pair had rallied to within a touching distance of 1.39, following last week’s downward spiral.
Bank holiday limits dollar activity:
The Independence Day bank holiday meant an empty US data calendar on Monday, with traders’ desks empty in observance of the Fourth of July celebrations. This left the dollar exposed to Friday’s US nonfarm payroll report, which showed job creation beat forecasts – cooling concerns about the timing of US interest rate hikes. The report also revealed the unemployment rate ticked higher, workforce participation remained the same and the pace of hourly earnings growth slowed – indicating interest rate rises could be further away than markets fear.
IHS Markit publishes its PMI for the UK construction sector in June this morning, which is forecast to edge lower from 64.2 to 63.5 – a reading above 50 represents growth.
US-based investors will return for a holiday-shortened week today. The spotlight initially falls on the US services sector, with the Institute for Supply Management publishing its closely watched PMI results for June. However, the focus for the dollar this week is the minutes from the Federal Open Market Committee’s June meeting due on Wednesday. This will provide investors with clues of when Federal Reserve officials might start tapering their crisis-era asset purchase program and raising interest rates from current near-zero levels.
GBP/USD Long (Buy)
Enter at: 1.3857