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Services slowdown triggered by sick days

Services slowdown triggered by sick days


UK services PMI edged down to 53.2, just 0.1 lower than preliminary readings of 53.3. The coronavirus triggered a slowdown in the rate of growth in new business via cancellations and project delays. There was a significant increase in cost pressures and charges increased at the fastest pace since November 2017. Higher inflation pressures will make the Bank of England’s policy balancing act even more difficult. The next Bank of England Governor Andrew Bailey stated that the bank could take bank rate down to about 0.1%, but there is limited scope for a monetary policy remedy. He also stated that decision making required  further evidence, curbing speculation of an emergency rate cut. 

The Pound gained some support from speculation that the Bank of England had less scope to cut interest rates compared to other central banks and fiscal policy could be boosted significantly. Sterling rose to 1.2870 against the Dollar and 1.1560 against the Euro. The Pound is stable at market open and there’s no UK economic data slated for release.



US ADP employment data recorded an increase in private-sector jobs of 183,000 for February and above consensus forecasts of 170,000, although there was a sharp downward revision for January to 209,000 from the 291,000 reported previously. The latest release is likely to raise fresh doubts over the accuracy of the data ahead of Friday’s jobs data. The ISM non-manufacturing index strengthened to a 12-month high of 57.3 for February from 55.5 previously and above consensus forecasts of 54.9. 

Although business activity faded slightly, new orders expanded at a stronger pace and the highest reading since June 2018. Employment increased at a faster pace, but the rate of price increases slowed on the month. The Markit PMI services-sector index, however, was confirmed at 49.4 for February, the weakest reading for over six years. The sharp divergence between indices increased underlying uncertainty and there were expectations of a sharp downturn for March readings. 

The Federal Reserve’s Beige Book reported modest to moderate growth in the latest period, but the COVID-19 coronavirus was cited as a risk and already weighing on travel and tourism.




The Euro-zone PMI services-sector index was revised marginally lower to 52.6 from 52.8 previously, but the composite index was unchanged at a 6-month high of 51.6. The German composite index dipped to a 2-month low amid export pressures. 

Having put on a good show during last week’s risk aversion, the common currency faced selling pressure yesterday as the US stock markets rallied after the US House of Representatives authorized nearly $8 billion for virus prevention. If the risk-on action continues, the selling interest around the Euro will likely strengthen.

As of writing, the Euro trades against the Dollar at 1.1125. 



Data to watch

All Day – All Currencies – OPEC Meetings 

17:00 – GBP – BOE Gov Carney Speaks 

23:30 – USD – FOMC Member Kaplan Speaks 

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