- Pound (GBP) falls after resilience last week
- UK business activity was revised higher
- Euro (EUR) rises ahead of data
- Eurozone retail sales are forecast to rebound
The Pound Euro (GBP/EUR) exchange rate is rising after ending last week at approximately the same level that it started. The pair rose +0.02% in the previous week, settling on Friday at €1.1320, after trading in a range between €1.1240 – €1.1423. At 05:45 UTC, GBP/EUR trades -0.14% at €1.1304.
The pound showed resilience last week, boosted by encouraging data, which helped cool recession fears. However, mixed messages from Bank of England policymakers limited gains in sterling.
Data showed that business activity and activity in the dominant service sector rebounded at a faster pace than expected in February. The services and composite PMI data were both upwardly revised to 53.5 from 48.7 and 53.1, up from 48.5. Strong business confidence and an improved economic outlook helped activity, while higher borrowing costs and squeezed household finances limited growth.
Meanwhile, BoE policymakers have been giving mixed messages, with BoE Governor Andrew Bailey suggesting that a rate hike in March isn’t inevitable. Meanwhile, Chief economist Huw Pill has hinted towards more hikes saying that the economy is stronger than initially expected.
Attention today will turn towards UK construction PMI data which is expected to show that activity in the sector contracted at a slower pace in February at 48.5, up from 47.5 in January.
The euro was also string last week after inflation proved to be stickier than expected, with core inflation rising to 5.6%. The market is now pricing in a 4% terminal rate for the European Central Bank after ECB President Christine Lagarde said that the central bank may need to keep hiking rates.
Today there is plenty of data for investors to digest, including eurozone retail sales, which are expected to rebound 1% month on month in January, after falling -2.8% in December.
However, eurozone investor confidence is expected to slip to -8.6 in March, down from -8 in February.