Pound Drops After Weak PMI Services Data

The pound dropped across the board this morning as PMI Services figures consolidated more than previously anticipated. Purchasing Managers Index for the services sector dropped to 54.3 in April from 57.1 in the previous month, missing the 56 forecasts. Sterling remained under pressure for a third in a row after reports showed that manufacturing and construction growth unexpectedly dropped and house prices declined for the first time in three months. In addition, NIESR (National Institute of Economic and Social Research) downgraded its January forecast for the UK GDP growth to 1.4% for 2011, citing that higher oil prices accounted for some of the weaknesses. Looking ahead to today, Bank of England’s MPC makes its latest policy announcement at 12:00. Market participant do not expect any change in the policy stance, with base rate left at a record low of 0.5% and the asset purchase program held at 200 billion pounds. European Central Bank also announces its policy decision today, with the expectations for the ECB President Jean Claude Trichet to signal further hike of the base rate this year.