The currency markets were more subdued yesterday as the markets await the latest policy decisions from both the Bank of England (BoE) and European Central Bank (ECB) later on today.
In the UK, the latest Markit/CIPS report showed that the UK service sector activity continued to expand in November with new business accelerating at a rapid pace but there were signs that price pressures, including higher input cost inflation and output charges are starting to come through.
David Noble, Chief Executive Officer at CIPS commented that "With positive prospects of market expansion, new product launches and a buoyant economic environment, alongside improvement in the housing market, businesses are confident that the current upturn will be prolonged into the New Year. Notably, price and supply chain pressures will be something to watch in the coming months but for now, we can be merry that services will continue to deliver growth heading into the festive period."
Today is also the day of Chancellor George Osborne’s latest Autumn Statement and it is thought that he will suggest that a budget surplus is in sight for the first time since the millennium but that for the time being, this government’s austerity measures will continue in an effort to balance the country’s books.
The euro received another body blow yesterday after the latest Markit euro zone service sector purchasing managers´ index (PMI) for November came in lower than had been anticipated.
Of equal concern, the figures continue to show a wide between euro zone member countries with the data from France and Italy indicating a return to recession in France and a staggering tenth consecutive quarter of contraction in Italy. In contrast, the data for Germany showed a robust level of activity.
In Canada, the central bank kept interest rates unchanged at 1%, a level set in September 2010 but indicated that with oil prices falling following the reintroduction of Iran into the world oil markets there was little upward price pressure sin the economy, a clear signal that the central bank remain content to see the currency depreciate. The Canadian dollar is already at its lowest level against the pound since November 2009.