The pairing extended losses following yesterday’s speech by Bank of England (BoE) Governor Mark Carney, whose dovish stance prompted fears of an interest rate cut in the coming months. Mr Carney indicated that global trade tensions had increased downside risks to a UK economy already grappling with Brexit uncertainty, saying that their lasting effects on economic growth had been “far more pervasive” than expected. He added that the bank’s “rationales for action are broadening”, which has been interpreted by many analysts as an indicator that the BoE could cut rates in the near-term. US dollar investors, meanwhile, are becoming increasingly jittery following the G20 ‘trade truce’ between the US and China, as economists continue to urge caution going forward.
Ethan Harris, the Head of Global Economics at the Bank of America Merrill Lynch, commented: “[T]he trade war is far from over, even with the ceasefire.
“There’s [still] a lot of things to talk about.”
Today, meanwhile, the pound came under even more pressure following the release of the UK Markit Services PMI figures for June.
The gauge fell below the forecast 51 to 50.2, narrowly avoiding contraction territory.
Chris Williamson, a Chief Business Economist at IHS Markit, further heightened fears of an imminent BoE rate cut.
He said: “The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction.”
“For policymakers to not loosen policy with the all sector PMI at its current level would be unprecedented in the survey’s two-decade history.”
Later this afternoon we will see a slew of US economic data, with the composite PMI figures for June being of particular interest.
Any signs of improvement would be US dollar supportive.
The exchange rate could, however, could benefit of if the US non-manufacturing PMI for June dips.