GBP/USD jumps 20 pips as UK Final Services PMI beats estimates with 53.9 in Jan

GBP/USD jumps 20 pips as UK Final Services PMI beats estimates with 53.9 in Jan

  • UK Final Services PMI revised upwards to 53.9 in Jan
  • GBP/USD jumps to session tops near 1.3060.
  • Risk sentiment buoyed by fresh optimism on coronavirus news.

The UK services sector activity expanded more-than-expected in the month of January, the final report from IHS Markit showed this Wednesday. 

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised higher to 53.9 in January versus 52.9 expected and a 16-month high of 52.9 – January’s first reading.

Key Points:

Business activity rises for the first time in five months.

Robust and accelerated increase in new orders.

Growth expectations continue to improve in January.

Tim Moore, Economics Associate Director at IHS Markit said:

“January’s PMI surveys give a clear signal that the UK economy has picked up since the general election, as a diminishing headwind from political uncertainty translated into rising business and consumer spending. We maintain our nowcast of UK GDP rising by approximately 0.2% in the first quarter of 2020, which represents an improvement on the sluggish conditions seen at the end of last year.“

“A solid return to growth in the service sector was the main factor behind the recovery in the UK economy, with survey respondents commenting that a rebound in sales enquiries had quickly translated into rising workloads so far this year.”

“Signs of greater willingness to spend and renewed positivity about the domestic economic outlook has helped lift service providers’ growth projections to the highest for just under five years. However, this sub-index was the only measure in the final UK Services PMI dataset to drop since the earlier ‘flash’ estimate, which may suggest that business expectations tailed off towards the end of the month.”

FX Implications:

The GBP flexed their muscles after the upward revision to the UK Services PMI for January, as GBP/USD hit a fresh two-day high of 1.3069. At the press time, Cable trades at 1.3059, still up 0.25% on the day.

The fresh boost to the risk sentiment, amid reports of a breakthrough achieved by the UK scientists in combating the China coronavirus outbreak, also benefits the risk currency, the GBP.

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