- Pound (GBP) rose yesterday after the PMI rebounded
- UK could avoid a recession
- Euro (EUR) fell despite strong data
- German inflation and IFO business climate data is due
The Pound Euro (GBP/EUR) exchange rate is falling after three days of gains. The pair rose 0.89% in the previous session, settling on Tuesday at €1.1370, after trading in a range between €1.1252 – €1.1381. At 05:45 UTC, GBP/EUR trades -0.09% at €1.1359.
The pound rallied higher on Tuesday after data indicated that the UK could avoid a recession this year. The &P Global & CIPS Pet thing managers index for February jumped to 53 up from 48.5 in the previous month. This is the first time in six months that the PMI has pushed above the critical 50-point threshold, which separates growth from contraction.
The return to growth in the private sector suggests that the UK economy is showing much more resilience than expected even as the Bank of England raises interest rates. Delving deeper into the data, the prices sub-index showed that business costs grew at the slowest pace since April 2021 suggesting that inflation could be cooling.
The data comes after inflation data last week shows that inflation cooled by more than expected in January but wages grew at a faster pace and retail sales rebounded raising doubts over what the BoE could do at the March monetary policy meeting.
The euro pushed higher on Tuesday after a keynote speech from Russian President Putin add no signs of war coming to an end and despite stronger than expected eurozone the eurozone composite PMI shows business grades at a 9 month high, boosted by a rebound service sector activity.
The composite PMI rose to 52.3 in February up from 50.3 in January. This was well above the 50 mark, separating growth from contraction. the data adds to mounting evidence that the eurozone could avoid a contraction in the first three months of 2023.
In addition to stronger-than-expected PMI data, the German ZEW Next economic sentiment also rose for a fifth straight month hitting 28.1 in February, well ahead of the 22 level expected.
Today German economic data remains in focus with the release of inflation figures for January and the Ifo business climate index for February, which is expected to improve to 91.4, up from 90.2.