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Today was the day that most city analysts were expecting to tell you that the interest rate here in the UK was going to rise at the MPC meeting currently going on. It has become clear in the past few months that this is now unlikely to most given the stagnant growth profile of the UK economy and the fears over government’s austerity measures.

Yesterday’s construction data was a prima facie example of the weakness. The PMI figure remained above the 50.0 level that delineates contraction and expansion albeit it lower than expected and giving the first decline since December. The construction sector seems to have been the reason for the fall off in yesterday’s figures from the manufacturing industry with the industry commenting on “subdued consumer confidence and lower orders from the construction sector” and today’s number has solidified the belief that builders are in trouble. The pound continued to get beaten up by the lack of solid economic data showing the recovery is ongoing. Today’s services number is key; a poor figure there will see sterling fall even more and would likely change expectations of a Bank of England rate increase as far out as next year with some market interest rate curves indicating January.

The market is now primed and ready for the ECB and the Bank of England’s thoughts this afternoon. While the Bank of England release is a foregone conclusion, the ECB press conference could throw up all kinds of rubbish. Any hint of more hawkish chat from Trichet, in the form of vigilance (strong or otherwise), and EURUSD could try and touch the 1.50 level sometime today. The UK services PMI is also key to the pound today with a decline from the 57.0 seen in March, but we expect the figure to still show strong growth in the UK’s most important sector.

Latest exchange rates at time of writing