UK Services Sector Stagnates, Brexit Weighs Economy

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BrexitBritain's service sector showed signs of stagnation in October, according to data released by IHS Markit.

UK services PMI went up from 49.5 in September to 50.0 in October. A reading above  50.0 indicates expansion while reading behind this mark indicates contraction.

Conversely, the UK construction output declined for its sixth consecutive month.  The construction purchasing managers’ index (PMI) went up from 43.3 in September to  44.2 in October, keeping on the contraction zone.

“Construction companies noted that client demand remained subdued in response to domestic political uncertainty and the economic backdrop,” explained IHS Markit,  “With a fall in civil engineering not seen for a decade and the biggest drop in housebuilding since 2016, it appears that strength in the sector is seeping away,” they added. 

With the Brexit negotiations essentially stalled, the UK economy, together with the Eurozone economy, keeps suffering the consequences of the increased level of uncertainty among the key economic agents. Boris Johnson continues with his rhetoric of getting the Brexit Done, while other European leaders don't disregard the possibility of a no-deal Brexit.

"That’s why I’m telling companies to prepare for all scenarios because the risk of a no-deal Brexit has not been removed,” said the French European Affairs Minister Amélie de Montchalin during a radio interview on Sunday.

Corbyn attacks Johnson's Brexit

The leader of the British Opposition Jeremy Corbyn, as an attempt to appeal to pro-remain and Brexiters at the same time, keeps pushing for a new referendum while attacking Johnson's Brexit deal. Labour's stance on the Brexit is very confusing, as it's still not clear whether they're pro-leaving the union or remaining, and his latest promise to renegotiate the whole Brexit deal only added to the confusion.

"You want to throw out the great new deal we have reached with our European friends, and instead negotiate a whole new treaty from scratch," told Johnson to Corbyn on a letter, 'For months you have refused to say what sort of 'deal' you want with the EU," he added.

According to Johnson, renegotiating the Brexit deal could take years and respecting the results of the 2016 referendum is necessary, therefore the United Kingdom should leave the European Union.

The  Senior Cabinet minister Michael Gove also criticized Corbyn, calling him a “terminally weak leader” and  describing Corbyn's plan to renegotiate the Brexit deal in less than three months as “beyond the realms of fantasy and science fiction and fairytale.”

Besides criticizing Corbyn, Gove said that the Brexit Transition Period won't be extended past 2020.

By 11:05 GMT  the GBP/USD pair went up by 0.19 percent, hitting the 1.2906 level. Conversely, the GBP/CHF  rose by 0.51 percent while the GBP/JPY climbed 0.41 percent, hitting the 1.2787 and 140.43 levels respectively

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.