GBP/EUR: Will UK Service Sector PMI Drag Pound Lower?
  • Pound (GBP) rises despite weak data
  • BoE speaks due later
  • Euro (EUR) falls after disappointing figures
  • Gas security is a concern

The Pound Euro (GBP/EUR) exchange rate is rising on Friday, adding to gains from the previous session. The pair rise +0.35% yesterday, settling at €1.1645, after trading in a range between €1.1568 – €1.1667. At 05:45 UTC, GBP/EUR trades +0.06% at €1.1652. The pair is set to rise just 0.07% across the week after losing -0.5% in the week before.

The pound rose yesterday after UK PMI data showed that business activity held steady in June, defying expectations of a slowdown in growth. The composite PMI came in at 53.1, in line with the previous month. The level 50 separates expansion from contraction.

Whilst this was better than expected there are plenty of warning signs in the data which point to a sharp slowdown in the coming months as they face spiraling prices caused by inflation.

Today the pound is rising despite disappointing retail sales data. Sales fell by 0.5% month on month in May, after April’s data was downwardly revised to 0.4% from 1.4%. The data showed that shoppers were cutting back in the supermarket as prices rise by the most in 40 years.

Looking ahead there is no more UK data to be released. Bank of England speakers Huw Pill and Haskel will be watched for further clues on monetary policy.

The euro fell yesterday after PMI data showed that business activity growth slowed by more than expected. The composite PMI, which is considered a good gauge for business activity fell to 51.9 in June, down sharply from 54.8. The marked slowdown suggests that the region is heading for a recession.

Today German IFO business climate data was also mostly disappointing, falling by more than expected to 92.3 from 93 in May.

In addition to weak data, news that German , as well as several other European nations, have sounded the alarm over Russian gas supplies is also a concern. Fears that Russia could halt gas supply soon are also weighing on the euro.