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Pound May Face Pressure With Weak PMI Data

July 5, 2017
by Latisha Liming
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The UK construction PMI data was released on Monday and the news is disappointing. The PMI index for the construction sector in the UK has dropped in June and it was much lower than the expected value. The PMI data from the UK has a greater significance because a growth in the construction sector could signal a growth in the economy. The economic data have a deeper impact on the value of the currency in the forex market.

Any significant growth in the economic data may boost the central bank’s interest in increasing the interest rates. The weak PMI data shows that increasing interest rates in the UK is less likely in the future. This will directly affect the value of the British Pound in the currency market.

In May, the Purchasing Managers’ Index (PMI) was at a 17-month high of 56.0. However, in June, this value dropped to 54.8 which is much lower than the expected drop to 55.0. Bank Of England recently showed some interest in joining the other major economies to increase the interest rates. However, the weak economic data shows that the UK is not ready for a change in monetary policies anytime soon.

However, not all hopes are lost because the service sector PMI will be announced tomorrow. Only then experts can get a clear picture of where the UK economy is headed. Following the release of the PMI data, Pound slipped in value, but it managed to recover later. If the economic data continues to be weak, the BoE will stop releasing hawkish comments.