Pound recovers as weak services data hits euro

The pound staged a recovery on Tuesday as weakness in the euro and dollar helped the UK currency shrug off weak services data.

Pound recovers as weak services data hits euro

The pound staged a recovery on Tuesday as weakness in the euro and dollar helped the UK currency shrug off weak services data.

Sterling jumped more than 0.7% versus the US dollar, pushing it back above the 1.30 mark at 1.302. It was also pushing higher against the euro, up 0.5% at 1.092.

It marked reversed fortunes for the pound, which dipped after the Markit/CIPS services purchasing managers' index (PMI) showed that British services activity sunk to its lowest level since September 2016 last month.

But weaker-than-expected services activity in the eurozone took a larger toll on the continent's currency, while interest rate comments by US Federal Reserve Board of Governors member Lael Brainard depressed the dollar.

David Madden, a market analyst at CMC Markets UK, said: "The GBP/USD has gained ground today, even though the latest figures for the UK services sector showed that it grew slower than expected.

"The services PMI report was 53.2, the consensus was for 53.5, and the previous report was 53.8.

"Sterling was already moving higher before the Fed's Lael Brainard stated inflation needs to pick before interest rates can be hiked, and those comments pushed the pound higher."

The pound's strength weighed on the FTSE 100, which closed down 0.5% or 38.55 points at 7,372.92.

Equity markets across Europe were mixed, with the French Cac 40 falling more than 0.3% and the German Dax up nearly 0.2%.

Brent crude prices jumped more than 2.5% to 53.50 US dollars per barrel as demand for oil continued to hold in the aftermath of tropical storm Harvey.

There are also concerns that oil production in East Asia could be hit by a possible war with North Korea, as tensions with the authoritarian state mount.

In UK stocks, Aveva shares soared more than 25% or 494p to 2,414p after the engineering firm confirmed it had struck a merger deal with the software arm of France's Schneider Electric, creating a group worth more than £3billion.

The deal comes after two failed merger attempts in the past two years.

Redrow jumped 27p to 647p amid news of a 20% rise in full-year revenues as the housebuilder defied fears of a housing market slowdown across the UK.

Strong sales helped Halfords shares rise 7.9p to 323.3p. The car parts-to-bicycles chain reported a 3.5% rise in like-for-like retail sales in the 20 weeks to August 18.

Shares in 888 Holdings fell 9.75p to 253.75p as the internet bookie recorded a half-year loss of $17.3m following a sanction for serious failings in its handling of vulnerable customers.

The biggest risers on the FTSE 100 were Merlin Entertainment up 9.6p at 467p, Paddy Power Betfair up 140p at 7,110p, Severn Trent up 25p at 2,275p, and Marks and Spencer Group up 3.4p at 324.2p.

The biggest fallers on the FTSE 100 were Provident Financial down 56p to 800p, Carnival down 190p to 5,165p, Reckitt Benckiser Group down 198p to 7,092p, and Fresnillo down 36p at 1,628p.

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