UK Services PMI

Pound Sterling exchange rates fell widely in midweek trade after respondents to S&P Global surveys cited high interest rates and other headwinds for an August softening of business conditions in the services industry underpinning the domestic economy with possible implications for Bank of England (BoE) interest rate policy.  

The UK economy underperformed many forecasters' expectations already during the opening quarter but the outlook for it darkened further this week and may mean the Bank of England (BoE) is more apt to disappoint financial markets in the months ahead, according to Pantheon Macroeconomics.

The UK services sector returned to growth last month as activity among companies in the UK's largest economic sector recovered from an earlier trough, according to the latest IHS Markit PMI survey, although it will be a tall order for the economy to better its first-quarter performance. 

The UK economy is likely to have stalled in the first quarter if Wednesday's IHS Markit services PMI is anything to go by, according to Capital Economics, as the sharp slowdown observed in the UK's largest economic sector means GDP growth will also have suffered.

The Pound pared earlier gains during the opening session of the week after IHS Markit data appeared to show activity within the U.K.'s largest economic sector cooling at the beginning of the final quarter. 

The latest IHS Markit services PMI marks a duo of disappointments for the U.K. this week, although markets were largely unmoved by the result as the Brexit negotiations and ongoing Conservative Party conference continue to dominate the agenda for economists. 

The Pound shrugged off a surprisingly strong increase in the IHS Markit services PMI for August, which pointed to robust growth in the UK's largest economic sector, as uncertainty over the trajectory of the Brexit negotiations and a "risk-off" mood across markets kept Sterling under pressure during morning trading Wednesday.