• Pound (GBP) rises as COVID restrictions removed
  • UK service sector surged ahead in February
  • Euro (EUR) falls as Russia cross border into Ukraine
  • German IFO business climate data due

The Pound Euro (GBP/EUR) exchange rate is rising on Tuesday for a sixth straight session. The pair gained 0.18% on Monday, settling at €1.2021, after rising to a high of €1.2033 earlier in the session, a three-week high.  At 05:45 UTC, GBP/EUR trades +0.05% at €1.2027.

The Pound gained ground yesterday after data showed that the UK economy rebounded strongly from Omicron in February. As Omicron cases fell and the government scrapped Plan B restrictions business activity surged. The closely watched IHS Markit /CIPS flash UK composite PMI rose to 60.2, up from 54.2 in January. This is usually considered a good gauge for business activity.

A surge in service sector activity was behind the strong data, as the services PMI hit an 8-month high, as work from home restrictions were ditched and consumers spent heavily on travel, leisure and entertainment.

However, the data also showed that costs were rising, and these are being passed on to the consumer. Higher wages and energy costs in addition to more expensive raw materials saw costs hit the second highest level since record began.

Adding to the good news for the Pound, Prime Minister Boris Johnson announced the end of legal self-isolation from Thursday. This will allow that UK economy to power ahead of those economies which still have restrictions in place.

Today, public sector net borrowing will be in focus, in addition to a speech from BoE’s Ramsden.

The Euro came under pressure yesterday and isd falling lower today after Putin recognized rebel held regions in Ukraine as independent and then ordered his troops into these regions. The West are preparing to apply sanctions to Russia.

On the data front, the Eurozone composite PMI came in ahead of forecasts yesterday thanks to the service sector outperforming. However, the manufacturing sector unexpectedly slowed slightly.

Today, the German IFO Business climate data will be in focus. Analysts are expecting an improvement to 96.5 in February, up from 95.7. Although data is likely to play second fiddle to Russia Ukraine headlines.