- PMI readings from Eurozone and UK will provide a clue as to how the economic recovery is developing
- Expectations are for a slowing in the pace of contraction, although expansion is still some way off
- Eurozone consumer confidence improved in June as lockdown measures eased
- At 05:15 Pound Euro exchange rate trades % at €1.1073
The Pound is edging cautiously higher, adding to gains from the previous session. The Pound Euro exchange rate settled on Monday +0.25% at €1.1069.
At 05:15 UTC, GBP/EUR is trading +0.1% at €1.1073 as investors await service sector and manufacturing PMI numbers from both the UK and the Eurozone.
Analysts are expecting the pace of contraction in the UK manufacturing sector and service sector to slow in June as lockdown restrictions started to ease. Expectations are for the manufacturing PMI to increase to 45, up from 40.7. The figure 50 separates expansion from contraction.
The service sector PMI is expected to increase to 39.5, up from 29. Whilst this is a step in the right direction is still a worryingly weak figure, particularly given that services account for around 80% of activity in the UK economy. A softer than forecast figure could drag heavily on the Pound. However, a stronger figure could boost hopes of a V-shaped recovery.
The data will come following yesterday’s IHS Markit’s monthly Household Finance Index for June, which was broadly in line with other macro statistics, suggesting a moderate recovery in June following the historic contraction in June. The data showed that British households remained downbeat about their financial prospects due to the damage caused by coronavirus. However, they are less pessimistic that they were in April or May.
Despite falling versus the Pound, the Euro was broadly in favour versus its major peers in the previous session following upbeat consumer confidence figures. Consumer morale jumped by more than expected in June, according to data from the European Commission. Confidence increased by 4.1 points on the index, to -14.7 in June, up from -18.8 in May, as governments across the region continued easing lock down restrictions.
Today attention will shift to service sector and manufacturing PMI readings across the region. Analysts are expecting to see the pace of contraction slow across the board. However, the sectors all remain a significant distance from expansion.
