- Pound (GBP) rises after 3 days of losses
- UK services PMI to remain solid
- Euro (EUR) rose as consumer confidence improved
- Eurozone PMI data is due
The Pound Euro (GBP/EUR) exchange rate is rising after three days of declines. The pair fell -0.14% yesterday, settling on Monday at €1.1497 and trading in a range between €1.1486 – €1.1523. At 05:35 UTC, GBP/EUR trades +0.07% at €1.1505.
The pound drifted lower in the previous session amid a lack of fresh fundamentals to drive direction. News that house prices jumped by 1.8% in May, the largest jump this year, up from a 0.2% rise in April. The data suggested that confidence was returning to the market, was shrugged off by investors.
Attention now turns to PMI data which should shed more light on how the UK economy is holding up amid high inflation and rising interest rates. The data could highlight the ongoing divergence in activity between the service sector and the manufacturing sector in the UK
The manufacturing PMI is expected to rise to 48 in May, up from 47.8 in April. The level 50 separates expansion from contraction. Meanwhile, the service sector is expected to expand at a slightly slower pace of 55.5, from 55.9. Stronger than expected PMI data could boost the pound.
The data comes as gloomy recession predictions from the start of the year have been toned down and the Bank of England has said that it doesn’t believe that the UK will enter a recession this year.
The euro pushed higher at the start of the week despite consumer sentiment improving by less than expected in May. Consumer confidence ticked higher to -17.4, up from -17.5 in April. Expectations had been for sentiment to rise to -16.7. Still, it was the second straight month that consumer sentiment has improved suggesting signs that easing inflation could be relieving some pressure on household spending.
Looking ahead attention will now be on euro zone PMI data which like the UK is expected to see an ongoing divergence between the service sector and the manufacturing sector. The services PMI is expected to ease to 55.6 from 56.2. The manufacturing PMI is set to improve to 46.2 from 45.8.