The British pound fell in dramatic fashion in afternoon trading against the US dollar on Wednesday after it was reported the EU will review MiFID after Brexit, likely to the detriment of the City of London. The losses came despite more evidence starting to pile up that the UK economy is on course for a ‘Boris bounce’ following a pickup in UK service sector activity in January.
GBP/USD was lower by 28 pips (-0.21%) at 1.3002 with a daily price range of 1.299 to 1.307 as of 2.00pm GMT. The currency pair was back up on Wednesday before finding some resistance at 1.305 and subsequently dropping back below 1.30. The losses detract from the +0.27% rise in the exchange rate on Tuesday.
Pound Sterling
It has been reported that officials in Paris, Berlin and Brussels are looking to amend MFID II, the set of regulations governing financial markets in Europe to remove concessions made to the United Kingdom. Polices governing trading in stocks, derivatives and commodities will likely all be revised – a hit to exchange houses, banks and other financial institutions that do business with Europe via London. Financial Services contributes more than any other sector to the UK economy and rule changes post-Brexit have been one of the biggest sources of concern.
Before the afternoon bout of selling , the pound had been higher after the UK Markit Services PMI saw a surprise leap to 53.9 when expectations for it to hold steady at the 52.9 printed in December.
USD/GBP – The dollar, a better bid in the afternoon following a rise in private sector jobs
The US ADP employment change for January was 291,000, above the 199,000 consensus estimate and well above the 156,000 gained in December. It’s the biggest gain in private sector employment since January last year and is a noticeable acceleration from the more mediocre data seen since the summer, averaging closer to 100k than 200k jobs gained each month. More closely followed will be the ISM non-manufacturing (services) PMI released at 15:00 GMT.
