- Pound (GBP) holds steady ahead of PMI data
- BoE’s Andrew Bailey said central bank prepared to act again
- Euro (EUR) jumped on hawkish Lagarde comments
- Eurozone PMI data due
The Pound Euro (GBP/EUR) exchange rate is holding steady after steep losses in the previous session. The pair settled -0.60% on Monday, at €1.1771 after trading in a range between €1.1757 – €1.1812. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1774
The euro jumped higher on Monday after upbeat economic data and after hawkish comments from the President of the European Central Bank.
German IFO business climate index unexpectedly improved in Mat, rising to 93, up from 91.8 in April and rising well ahead of the 91.4 that analysts had expected. The strong result comes despite surging input prices
Comments from ECB President Christine Lagarde boosted the common currency further. Lagarde said that she expects the ECB to end net bond purchases under the APP very early in the third quarter and for interest rates to no longer be negative by the end of Q3. This means that the ECB are looking at raising interest rates several times of the summer, lifting the euro.
Looking ahead the eurozone economic calendar will remain in focus with the release of PMI data. The composite purchasing managers index (PMI), which is often considered a good gauge for business activity is expected to ease slightly to 55 in May, down from 55.8 in April. The level 50 separates expansion from contraction, so the data is expected to show that business activity is holding up well despite the fallout from the Russian war.
The pound fell against the euro but remained strong against the US dollar. optimism surrounding Brexit kept sterling well supported.
BoE Governor Andrew Bailey said that the BoE would continue raising interest rates to tame inflation, but investors shrugged this off.
Looking ahead today sees the release of UK services and manufacturing PMI data. Expectations are for both sectors of the economy to see a slight slowdown in activity but remain resilient given the backdrop of surging input prices.
The services PMI is expected to slip to 57.3 in May, down from 58.90 and the manufacturing PMI is expected to slip to 55.3 down from 55.8.
