- Pound (GBP) fell yesterday as investors dumped riskier assets
- UK composite pmi unexpectedly fell
- Euro (EUR) gained despite falling versus the USD
- Eurozone PMI was a mixed bag
The Pound Euro (GBP/EUR) exchange rate is edging higher after a steep selloff yesterday. The pair fell 0.3% in the previous session, settling at €1.1914 after having fallen as low as €1.1873 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.11% at €1.1925.
The pound came under pressure yesterday, hurt by weaker than expected PMI data and the risk off mood to trade.
UK PMI data revealed that UK business activity growth unexpectedly slowed in January to an 11-month low. According to the IHS Markit/CIPS the Composite PMI declined to 53.4 in January, down from 53.6 in December. The level 50 separates expansion from contraction.
The spread of Omicron hit consumer facing companies again in January, as in December. However, with the restrictions put in place to stem the spread of the virus have since been removed, the impact on the economy is expected to be modest compared to earlier waves.
The data also showed that inflationary pressure remain strong at near record levels and are likely to prompt the BoE to raise interest rates at the February meeting next week.
Also weighing on the pound is the broad risk off mood in the market as tensions between Russia and Ukraine rise.
Whilst there is no high impacting UK data due to be released today, attention will be on Downing Street as PM Boris Johnson continues to cling to power ahead of the release of the party gate enquiry.
The Euro rose versus the pound by fell versus the safe have US dollar on Monday after mixed PMI data. Data from the Eurozone revealed that business activity slowed for a second straight month in January as Omicron impacted the region’s economy, particularly the service sector. However, the manufacturing sector saw growth improve ass supply chain issues showed some signs of easing.
Looking ahead the Eurozone IFO business condition survey will be in focus, in addition to any developments surrounding Russia – Ukraine tensions.
