- Pound (GBP) declines steeply on Tuesday despite reopening optimism
- IMF raises UK economic growth forecast to 3%
- Euro (EUR) rises sharply after upbeat sentiment data
- Eurozone & UK service sector PMI in focus
The Pound Euro (GBP/EUR) exchange rate is edging higher after steep losses in the previous session . The pair settled -1.06% lower on Tuesday at €1.1637. The steep selloff came after the pair hit a 14 month high of €1.1805 at the start of the week. At 05:15 UTC, GBP/EUR trades +0.1% at €1.1650.
The Pound dropped sharply lower in the previous session despite plenty of good news. The pound plunged even after UK Prime Minister Boris Johnson announced that the UK would go ahead with reopening the economy on April 12. There are, however, growing doubts about international travel resuming on May 17.
The International Monetary Fund raised its forecast for UK economic growth, which is now set to out pace the Eurozone this year. The IMF now foresees the UK economy growing 5.3% in 2021, up from the previous forecast of 4.5% made in January.
The UK was one of the worst affected countries with GDP contracting 10% last year. However, the UK’s rapid vaccine programme has changed the UK’s fortune’s rapidly. Almost half of the UK adult population has had a covid jab compared to less than 15% in Germany & France.
Attention will now turn to the UK service sector PMI data which is expected to confirm the preliminary March reading at 56.8. The figure 50 separates expansion from contraction.
The Euro picked up across the board in the previous session, thanks in part to impressive Eurozone sentiment data. The Sentix investor sentiment index jumped to 13.1 in April, up from 5 in March and well ahead of the 6.7 forecast. Hopes that the vaccine programme in the region will pick up is boosting confidence.
Service sector PMI data will be in focus today. Today’s reading is expected to confirm the preliminary reading which revealed that the sector contracted by less severely than in February. A stronger than forecast number could help lift the Euro.