- Pound (GBP) look to BoE rate decision
- UK services sector activity increased by more than forecast
- Euro (EUR) finds last support from weaker USD
- EZ Composite PMI data due
The Pound Euro (GBP/EUR) exchange rate is holding steady on Thursday after gains in the previous session. The pair settled +0.23% higher on Wednesday at €1.1782 after briefly pushing beyond €1.18 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1784.
The Pound charged higher on Wednesday following the release of data which revealed that the dominant UK service sector saw its recovery ramp up in October despite surging prices. The closely watched services PMI rose to 59.1 in October, up from 55.4 in September and above the 58 initial October reading. A level of 50 separated expansion from contraction.
The report suggested that the acceleration in growth was due to the re-opening of the UK economy and loser travel restrictions. However, supply chain issues, labour shortages and rising energy costs meant providers boosted prices at the fastest rate since the survey began 15 years ago.
Attention will now turn to the Bank of England and the most unpredictable interest rate decision in years. According to the CME Group BoE watch tool, the market is fully pricing in an interest rate hike of at least 0.15% today. Analysts are more cautious over whether the central bank will hike rates but note that it is a tough call.
The Euro broadly struggled for direction in the previous session, failing for find a catalyst in the latest unemployment data for the region. Unemployment in the bloc decreased 0.1% amid signs of economic recovery ion the region.
The Euro found some strength later yin the session, boosted by the weaker USD. The Euro trades inversely to the USD. The US Dollar came under pressure after the US Federal Reserve announced he tapering of bond purchases but firmly pushed back any interest rate hike saying that the US economy was needed to be closer to full employment before that Fed would consider hiking interest rates. This puts the focus firmly on Friday’s non-farm jobs report.
Today Eurozone composite PMI data could drive the Euro. Expectations are for a slight slowdown.