- Pound (GBP) rises after gains last week
- BoE Chief Economist Huw Pill to speak
- Euro (EUR) falls even after German factory orders rise
- Eurozone composite PMI figures due
The Pound Euro (GBP/EUR) exchange rate is rising, adding to gains from last week. The pair rose 0.14% last week, settling on Friday at €1.1531 and trading in a range between €1.1420 – €1.1545. At 09:00 UTC, GBP/EUR trades +0.12% at €1.1445.
The pound rose last week even though the Bank of England left interest rates on hold at 5.25% and hinted that it was at the end of its hiking cycle. However, Andrew Bailey, the Bank of England governor, did warn that interest rates would stay high for longer in order to tame inflation, which is still over three times the Bank of England target level.
The BoE chief economist Huw Pill is due to speak later today, and investors will be watching his comments carefully for any additional clues over the outlook for inflation and interest rates. A hawkish-sounding Pill could lift the pound higher.
Meanwhile, on the data front, UK construction PMI figures will be in focus. However, given that the sector is only responsible for around 10% of UK economic activity, it’s unlikely to have a big influence on sterling.
The data comes after the UK services PMI was marginally better than expected in October at 49.5 ahead of the 49.2 preliminary reading. The data suggests that the UK is flirting with a mild recession as demand for the UK dominant service sector calls contracts for the third straight month.
The euro is trading under pressure despite better-than-expected German factory orders. The data showed that German factory orders unexpectedly edged higher in September, rising 0.2% month on month, well ahead of the 1% decline that was forecast but down from the 1.9% seen an August.
Delving deeper into the figures, the rise came after a 4.2% jump in foreign orders, which offset a 5.9% decline in domestic demand.
The data came after the German economy shrank 0.1% during the third quarter, which puts it on track for a recession if the trend continues in the final three months of the year.
Attention will now turn to euro zone services and composite PMI data, which are expected to show that both the service sector and business activity in general contracted further in October.
Weak data could send the euro lower.
