Sterling climbs on service PMIs with shortening expectations of BOE rate hike

FXstreet.com (London) - Sterling has received another boost with the UK service sector PMI busting expectations, printing at 62.5 versus expectations for a small drop to 60.0 from last month’s 60.3 reading. The numbers indicate that the UK services sector, which makes up 75 percent of the economy, is growing at the fastest rate since 1997.

With composite UK PMI readings suggesting fourth quarter GDP could rise by 1.5 percent sterling could continue to gain against the euro as long as ECB rate cuts and LTROs are being talked about.

The UK has seen a near-unbroken run of strong results since the end of the second quarter. Sterling has climber from USD1.4861 lows on 10 July to highs at USD1.6233.

And with the steadily increasing results, there will be greater questioning of Bank of England rate hike projections. The Bank of England has said that it will only move to hike rates when unemployment levels have dropped below 7 percent – something that it had originally forecast for 2016.

There is also hope that the rising composite PMI numbers indicate that the economy is reducing the slack in labour demand – something that may provide some much needed upwards pressure on nominal wages which have seen gains outstripped by inflation for four years.

EUR/GBP has fallen 0.65 percent to GBP0.8409 so far.