Derek Halpenny, European Head of GMR at MUFG, suggests that there have been a few readings now showing a rebound in UK business sentiment from the initial lows post-Brexit.

Key Quotes 

“But the rebound in the Markit Services PMI yesterday that resulted in the Composite PMI jumping 6 big figures to 53.6, the highest level since March, pointed more strongly than any other data to the prospect that the UK will avoid a contraction in real GDP growth.

The survey findings pointed to the swift action of the BoE to ease its monetary stance and the removal of political uncertainty by the creation of a new government sooner than originally expected as the key factors in the rebound in confidence. While we shouldn’t draw any definitive conclusions from a one-month rebound in sentiment, it has clearly shifted the odds toward the economy performing better than the BoE expects in H2. Governor Carney tomorrow in testimony to parliament will no doubt highlight this improvement in the data but will certainly associate it to the prompt action from the BoE.

As stated here yesterday, the still heavy short GBP speculative position leaves the pound vulnerable to further upside risks over the short-term. While we see near-term upside risks we are still cautious on the sustainability of any upside move given that political developments in the UK are likely to come back into focus after the summer break and that points to the potential for political uncertainty starting to weigh on sentiment going forward.”