GBP

Sterling rebounded against the euro and dollar on Monday, benefitting from global stock markets rallying following a switch to ‘risk on’ sentiment. The shift saw sterling gain 0.6% against the euro and 1% against the dollar.

This is welcome news for the pound which was declining last week, dropping to recent lows vs the euro and annual lows against the dollar. This was largely due to rising global Covid-19 concerns threatening the global economic recovery.

Despite this respite, yesterday’s flash Purchasing Managers Index (PMI) reading from IHS Markit – an early indicator of economic health – did little to ease investor concerns UK data is stalling. Services PMI for August fell to 55.5 from 59.6 in July and missed expectations of 59. The manufacturing PMI, however, was more encouraging showing 60.1 and beating expectations of a fall to 59.

But this failed to have any significant impact for sterling as investors place greater emphasis on UK services data. This accounts for around 70% of the UK economy compared to manufacturing which is 15-20%.

EUR

The Eurozone PMI was also released yesterday and despite missing expectations showed the bloc outperformed the UK in August.

The data showed Eurozone manufacturing PMI at 61.5, below forecasts of 62. Services PMI read 59.7, narrowly missing expectations of 59.8. The PMI composite fell to 59.5 from 60.2 previous but below expectations of 59.7.

Key announcements

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