- Pound (GBP) is rising for a 3rd straight day
- UK construction PMI contracts
- Euro (EUR) fell after composite PMI dropped to 49.9
- Eurozone retail sales are due
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose +0.17% in the previous session, settling on Wednesday at €1.1703 and trading in a range between €1.1600 – €1.1706. At 09:35 UTC, GBP/EUR trades +0.15% at €1.1720.
The pound is pushing higher at the sort of a relatively quiet day on the economic calendar. UK construction PMI numbers are being shrugged off. The construction PMI fell to 49.8 in June, down from 51.6.
Meanwhile, the pound remains broadly supported by expectations that the Bank of England will continue hiking interest rates in order to tame inflation which remains particularly high in the UK. Inflation is still at 8.7%, considerably higher than in other G10 currency countries.
The market expects the Bank of England to raise interest rates to a peak of 6.25% this hiking cycle. Economists, however, think that the Bank of England will hike rates to a lower peak of 5.75%. The next Bank of England interest rate decision is at the beginning of August, where the market is pricing in a 50 basis point rate hike after the central bank hiked by 50 basis points in June.
Do you arrive continues to fool as investors digest weak business activity data from the region. The eurozone composite PMI, which is widely regarded as a good indication of business activity, contracted to 59.9 in June, down from 52.8 in May.
The region experienced a broad-based downturn, with the services sector expanding at a slower pace under deeper contraction in manufacturing as domestic and foreign demand dropped. Contracting business activity increases the likelihood of the recession within the region extending for another quarter.
Attention now turns to eurozone retail sales, which are expected to rise 0.2% month on month after stalling at 0% in April. Weak sales could raise concerns over consumer spending and a deeper recession.