• Pound (GBP) rose in a quiet session yesterday
  • UK services PMI is expected to be 53.7 in June
  • Euro (EUR) fell after the German trade balance narrowed
  • PPI inflation data is due

The Pound Euro (GBP/EUR) exchange rate is falling, giving back some of yesterday’s gains. The pair rose +0.48% in the previous session, settling on Tuesday at €1.1683 and trading in a range between €1.1624 – €1.1631. At 05:35 UTC, GBP/EUR trades -0.09% at €1.1675.

The pound pushed higher in the previous session despite a lot of fresh fundamental drivers. The pound is being broadly supported by expectations that the Bank of England will hike interest rates again on the 3rd of August by 50 basis points after a 50 basis point hike in June.

The market is also pricing in a further 125 basis points between now and the first quarter of next year. Although economists are less hawkish, believing that the peak rate will be around 5.75%, so 75 basis points above the current rate.

Attention now turns to UK service sector PMI data which is expected to show that activity grew at a slower pace of 53.7 in June, down from 55.2 in May. Weaker data could point to fewer hikes from the central bank and pull the pound lower.

Theory fell in the previous session after German trade data missed forecast. The seasonally adjusted trade surplus fell to €14.4 billion in May, down from €16.5 billion in April and well below consensus estimates of 17.5 billion. Xbox raise just 0.1% month on month but fell 0.7% on an annual basis. Imports rose 1.7%, contributing to the narrower trade balance.

Looking ahead, eurozone services PMI and composite PMI which is considered a good gauge of business activity ready to be released as well as wholesale inflation data.

Eurozone business exhibiting is expected to grow at a much slower pace of 50.3 in June, down from 52.8 in May.

Meanwhile, wholesale inflation is set 24 1.3% and really in May after rising 1% in April. Cooling wholesale inflation indicates that consumer prices could also fall, taking pressure off the ECB.