UK economy showing signs of a slowdown

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Pound Sterling

The Pound has fallen to a three-week low against the US Dollar as the markets await the release of the latest UK service data. The service sector is the most important to the UK economy and it is predicted that it will show signs of a slowdown. The Markit Services PMI was previously at 53.7 but is expected to come in at 53.0 later this morning. Sterling continues to be weaker against the Euro as speculation that the Spanish will soon request a bailout improved appetite for the single currency. The predicted slowdown of the UK service sector has also dragged on the Pound against the Euro.

US Dollar

The US Dollar strengthened against a basket of currencies as demand for safe haven currencies rose. Weak economic data out of Australia and China deepened the gloom and raised fears over the health of the global economy. Risk appetite continues to be harmed by the situation in the Euro zone, particularly the uncertainty over whether Spain will request a bailout. The ‘Greenback’ also strengthened to a one and a half week high against the Japanese Yen.

The Euro

The Euro is hovering above a three-week low as signs of economic weakness in Europe continue to drag on the single currency. The latest data out of the region has so far all been negative indicating that the Eurozone is heading for a deep recession by the end of the year. Many economists believe that the European economy is in worse shape than they previously expected. Spain continues to be the big concern as its latest services PMI showed that fell to 40.2 in September, from 44 in August. This is well below the 50 level that divides growth from contraction, and representing the sharpest fall since November 2011.

Australian Dollar

The ‘Aussie’ has extended its losses against its peers as speculation mounts that the Reserve Bank of Australia will have to make further cuts to the countries interest rates, despite slashing them by a quarter-point yesterday. Signs of increasing slowdown in China and the release of data showed that Australia posted its widest trade deficit since 2008. According to Australia’s Bureau of statistics the country’s trade deficit widened to A$2.03billion in August. The US Dollar strengthened further as a result to increasing risk aversion for the oceanic currencies.

New Zealand Dollar

The ‘Kiwi’ is trading lower today against the US Dollar after being weighed down by the weakness of the Australian Dollar. With little data due to be released from the country the fortunes of the ‘Kiwi’ now depend on events elsewhere. Further signs that the Chinese economy is slowing down and the continuing uncertainty in Europe are all set to drag on the currency.

Canadian Dollar

The ‘Loonie’ is trading lower against the US Dollar due to the weak demand for riskier commodity based currencies. The Canadian Dollar has also suffered from the weakening decline in demand for its biggest export of crude oil.