- Pound (GBP) looks to BoE, no change in policy expected
- BoE in focus later in the week
- Euro (EUR) under pressure after weak retail sales & composite PMI downward revision
- German factory orders due
The Pound Euro (GBP/EUR) exchange rate is creeping higher on Thursday. The pair settled roughly flat on Wednesday after booking strong gains earlier in the week. The pair settled at €1.1731. At 05:45 UTC, GBP/EUR trades +0.05% at €1.1738.
Growth in the UK services sector slowed last month as inflation surged and as businesses experienced staffing issues. The IHS services PMI printed at 59.6 in July, down from 62.4 in June. The service sector, the dominant sector in the UK economy recorded its slowest growth since March amid staff shortages and supply chain issues.
The rising number of covid cases saw more and more employees “pinged” by the NHS app and told to self-isolate, meaning that they were unable to attend work.
Today all eyes are on the Bank of England monetary policy announcement. The BoE is not expected to adjust monetary policy keeping the interest rate at a record low 0.1% and the bond purchases at £895 billion.
The focus will be on the quarterly inflation report which is expected to see the central bank upwardly revise its inflation outlook from 2.5% towards 4%. The growth outlook may be lowered this year as a result of rising delta covid cases which are clouding the near-term outlook. Furthermore, the government’s furlough scheme is also due to end this Autumn giving the BoE more reason to sit tight.
The Euro traded flat versus the Pound but fell versus the US Dollar in the previous session after Eurozone retail sales disappointed and the composite PMI was downwardly revised in July. The composite PMI which is considered a proxy for business activity rose in July to 60.2, up from 59.5 but down marginally from the flash 60.6 reading.
Looking ahead attention will remain on the Eurozone economic calendar with the release of German factory orders. Orders are expected to rise 1.5% month on month after contracting -3.7% in the previous session.