Sterling spent another week in the red as preps for a “no deal” situation have begun. Any catalysts that could turn things around this week?
U.K. services PMI (Aug. 5, 8:30 am GMT)
First up, we’ve got the U.K. services PMI up for release on Monday’s London trading session. Now this could have the strongest impact among the PMI surveys as the services sector accounts for majority of overall growth.
Analysts are expecting to see a small improvement from 50.2 to 50.4 to signal a slightly faster pace of expansion. Note, however, that both the manufacturing and construction PMI readings failed to impress in July so there’s a chance that the services sector could show weakness as well.
U.K. preliminary GDP (Aug. 9, 8:30 am GMT)
Before the week comes to a close, the U.K. will be printing its preliminary GDP for the second quarter of the year. Number crunchers are expecting to see a flat reading for the period after seeing a 0.5% expansion in Q1.
Along with this, the U.K. will also release its monthly GDP reading for June and might show a meager 0.1% uptick. The manufacturing production figure for the same month will also be released and might indicate a 0.1% dip.
Keep in mind that the BOE recently downgraded their growth forecasts, so actual figures that underscore this gloomy view could drive sterling further south.
Brexit talks with the new U.K. PM are set to resume this Monday, and many expect the discussions to center on “no deal” contingency plans. After all, Boris Johnson has repeatedly expressed his willingness to let the U.K. leave the EU with or without a deal by October 31 and negotiations with the Brussels aren’t going well either.
However, there is still no clear majority in parliament when it comes to accepting a potential “no deal” outcome, so there could be plenty of drama on the home front. There’s even talk of a general election again!
With that, a lot of the market attention is likely to be fixed on how talks turn out and what EU officials have to say about how things are unfolding. More signs pointing to a likely “no deal” outcome could put more weight on the pound.
Missed last week’s price action? Read GBP’s price recap for July 29 – August 2!