- Pound (GBP) is holding last week’s gains
- BoE remains hawkish as inflation is stubbornly high
- Euro (EUR) looks to a slew of data
- Eurozone services PMI, investor sentiment, and retail sales are due
The Pound Euro (GBP/EUR) exchange rate is holding steady at the start of the week after booking a fourth straight week of gains last week. The pair rose 0.2% last week, settling at €1.1655 after trading in a range between €1.1524 – €1.1705. At 05:25 UTC, GBP/EUR trades +0.07% at €1.1564.
The pound rallied last week despite it being a quiet week for data. Instead, sterling benefitted from the risk-on sentiment. Meanwhile, with inflation still at 11.1% and showing few signs of falling, Bank of England policymakers continue to support further rate hikes, underpinning the pound.
Attention now turns to the service sector PMI data, which is expected to show that activity in the service sector contracted in November. The services PMI is forecast to be 48.8 the same as it was in October. The level 50 separates expansion from contraction.
The data comes after the manufacturing PMI last week, which showed that the downturn in the industry continues. Whilst the manufacturing PMI edged up 246.5 in November from 46.2 in October, this was still close to the 2 ½-year low. These figures added to evidence that the UK economy had fallen into recession.
The euro fell last week after inflation in the eurozone fell by more than expected to 10% yeah ran yeah in November, down from 10.6% in October. The data raises questions over whether the European Central Bank will raise interest rates by 75 basis points in the December meeting or slow the pace to 50 basis points.
Today there is plenty of data for investors to be focusing on. Eurozone business activity as measured by the S&P global composite PMI, is expected to confirm a contraction in November the PMI is expected at 47.8.
Separately the Centex investor confidence index for December is expected to improve slightly to -27.1 up from -30.9. Improving investor morale could help boost the euro.
Finally, eurozone retail sales data is also expected and is due to show a full of 0.6% month on month in October. This comes after a rise of 0.4% in September.
