- Pound (GBP) trades broadly under pressure amid Brexit concerns as the clock ticks
- Service sector PMI could offer some support
- Euro (EUR) has failed to pick up after data showed inflation turned negative
- Italy & Spain expected to see a downward revision to service sector PMI
The Pound Euro (GBP/EUR) exchange rate is gaining altitude for the third straight session on Thursday. The pair settled +0.25% at €1.1258 on Wednesday, just shy of the high of the day. At 05:15 UTC, GBP/EUR trades +0.17% at €1.1278, an almost 3-month high.
The movement in the pair is more a Euro weakness story rather than owing to Pound strength. The Pound is trading broadly lower versus its major peers, weighed down by Brexit pessimism and comments from Bank of England policy makers.
Whilst BoE Governor Andrew Bailey said that inflation expectations have remained broadly steady, other policy makers were not so optimistic. Andrew Bailey will speak again later today; his comments will be eyed carefully.
Chief EU negotiator Michel Barnier added to the Pound’s woes, saying that the UK must make a move now to soften its stance on fisheries, fair competition and solving disputes in order to agree a deal by the end of the strict October deadline. Michel Barnier added that the JUK has not shown sufficient flexibility in these areas for a deal to be achieved.
Attention will now turn to the UK service sector PMI data release. Analysts are expecting confirmation of the initial estimate of 60.1. The figure 50 separates expansion from contraction.
The Euro is being slammed lower across the board on Thursday despite a risk on mood in the financial markets. Earlier in the weak data revealed that inflation in the bloc unexpectedly turned negative. The Euro slipped and has failed to find its footing since.
Attention now will turn to Eurozone service sector PMI’s, with downwards revisions expected for Italy and Spain, taking the sectors back into contraction. Both Italy and Spain are heavily dependant on tourism. However, with travel still limited and Spain off the safe list these industries will have endured a hit.
