- Pound (GBP) rises ahead of UK CPI data
- UK services inflation remains strong
- Euro (EUR) slips after disappointing PMI data
- German IFO business sentiment is due
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.23% yesterday, settling on Tuesday at €1.1524 and trading in a range between €1.1468 – €1.1537. At 05:35 UTC, GBP/EUR trades +0.09% at €1.1534.
The pound pushed high on Tuesday, despite data showing that the UK service sector expanded at a slower pace than expected in May and despite the UK manufacturing sector contracting at a faster pace, than forecast. The services PMI was 55.1 down from 55.9 in April. Meanwhile, the manufacturing PMI fell to 46.9 down from 47.8, and well below the 48 forecast.
Delving deeper into the figures, the data showed that companies in Britain service sector increased prices at a fast pace in May, OK it down slightly from the peak. The data could worry the Bank of England as it continues to weigh up whether to raise interest rates or not to in June.
Today the focus will be on UK inflation data which is expected to fall to 8.2% year on year in April, down from 10.1% in March. Core inflation which strips out no volatile elements such as food and fuel is expected to hold steady at 6.2%. Hot inflation could feel better, but the Bank of England will raise interest rates again.
The data comes after Bank of England Governor testified before the Treasury Select Committee. Mr Bailey said that he expects inflation to fall rapidly across the second part of the year. The IMF also upwardly revised its growth forecast, with the UK no longer expected to fall into a recession this year.
The euro came under pressure, weighed down by disappointing PMI data. The composite PMI data, which is often considered a good gauge for business activity, fell by more than expected to 53.3 from 54.1 in April.
Looking ahead the German IFO business climate index will be in focus and is expected ease lower to 93 from 93.6.
