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  • UK Final Services PMI sees upward revision to 39.5 in January.
  • GBP/USD remains depressed above 1.3650 on the UK data.
  • Eyes on US ADP, ISM Services PMI amid a broad USD bounce.

The UK services sector activity contracted less-than-expected in January, the final report from IHS Markit confirmed this Wednesday. 

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised higher to 39.5 in January versus 38.8 expected and a 38.8 – last month’s flash reading.

Key points

Fastest decline in business activity since May 2020.

Job shedding accelerates amid shrinking order books.

Growth expectations rise to the highest for nearly seven years.

Tim Moore, Economics Director at IHS Markit, which compiles the survey

“Service providers experienced a steep downturn in business activity due to the third national lockdown in January, although the speed of decline remains much slower than last spring. Tight restrictions on travel, leisure and hospitality resulted in severely reduced trading among customer-facing businesses.”

“Temporary closures led to shrinking demand for business services and a ripple effect of corporate spending cutbacks. As a result, total new work fell at the fastest pace since May 2020 and this setback contributed to a steeper rate of job shedding at the start of the year.”

FX implications

The GBP bulls were undeterred by the dismal UK Services PMI, as GBP/USD held onto gains above 1.3600, courtesy of the broad US dollar weakness. At the press time, the spot trades

The US dollar looks to resume the recent rally, as it recovers losses against its main peers. The risk-on flows are seen cooling-off a bit in the European session, putting a fresh bid under the safe-haven US dollar.

All eyes on the US ADP jobs data and ISM Services PMI for fresh impetus while updates on the US stimulus will be also closely followed.