UK: Services PMI survey expected to reinforce recession concerns - MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that the UK pound remains under downward pressure in the near-term undermined by building concerns that the UK economy is slowing sharply following the Brexit vote.

Key Quotes

“Those concerns were reinforced yesterday by the release of the latest construction PMI survey which revealed that business confidence plunged by 5.2 point to 46.0 in June. It was the lowest reading since June 2009. Markit stated that just over 80% of survey responses were received before the referendum result.

The full negative impact on business confidence from the referendum will be evident in the coming months likely signalling an even sharper slowdown. Markit noted that “construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run up to the referendum. However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook”.

Standard Life has announced as well that it has been forced to stop retail investors from selling out of the UK’s third largest open-ended property fund further highlighting the loss of investor confidence in the UK economy. The release today of the latest services which is by far the most import sector in the UK economy will be watched even more closely and poses a more material downside risk for the pound.”