GBP/USD: Can UK Service Sector Data Revive The Pound After No Progress on Brexit Deal
  • Pound (GBP) steadies after solid gains
  • BoE in focus later in the week
  • Euro (EUR) under pressure across the board
  • Eurozone retail sales & composite PMI in focus

The Pound Euro (GBP/EUR) exchange rate is treading water after gains in the previous session. The pair settled firmly higher on Tuesday up +0.3% at €1.1730, the high of the day. At 05:45 UTC, GBP/EUR trades flat at €1.1730.

The Pound was  in favour on Tuesday. There was little in the way of economic data to lift sterling instead upbeat sentiment surrounding the vaccine rollout and optimism that the government won’t add further categories to the travel lists have helped boost demand for sterling.

Today attention will shift to the services PMI report. Analysts are expecting activity growth in the service sector to slow to 57.8 in the final reading for July, down from 62.4 in June. The level 50 separates expansion from contraction.

Supply chain constraints, rising infections and subdued consumer demand weighed on the recovery in the dominant service sector. That said, the level of activity is still well above the historical average. A weaker than forecast reading could drag on the Pound.

Looking ahead the Bank of England monetary policy announcement is due on Thursday. The BoE are not expected to move on policy. However, the inflation forecast could be upwardly revised, and Q3 GDP growth downwardly revised amid the ongoing covid flare up.

The Euro came under pressure in the previous session as the US Dollar strengthened across the board. The Euro trades inversely to the greenback.

Whilst the Eurozone economic calendar was sparce on Tuesday, things pick up again tomorrow with Eurozone retail sales and Eurozone composite PMI data due, this is often considered a good gauge of business activity.

The Eurozone composite PMI reading in July is expected to confirm the flash reading of 60.6 in July. This would mark the highest level since June 2000. Eurozone companies were seeing orders rise at the fastest pace in 21 years as the economy continued reopening.

Separately Eurozone retail sales are expected to rise 1.7% month on month in June after surging 4.6% in May.