- Pound (GBP) rises as PMI data beat forecasts
- The service sector returns to growth
- Euro (EUR) falls despite PMI figures improving
- ECB meeting minutes are due
The Pound Euro (GBP/EUR) exchange rate is rising, rebounding from losses yesterday. The pair fell -0.15% in the previous session, settling on Wednesday at €1.1471 and trading in a range between €1.1461 – €1.1504. At 09:30 UTC, GBP/EUR trades +0.22% at €1.1496.
The euro is pulling against the stronger pound despite better-than-expected business activity data for the eurozone region and as investors look ahead to the release of the minutes from the ECB meeting.
Eurozone manufacturing PMI rose to 43.8 in November, up from 43.1 this was ahead of forecasts of 43. Meanwhile, the services sector also contracted at a slower pace of 48.2 compared to 47.8 in October. As a result, the eurozone composite PMI, which is a good gauge for business activity, was 47.1, up from 46.5, suggesting that a bottom in the contraction may have been reached.
Looking ahead, attention is on the ECB minutes to the October meeting. These come as the market believes that the central bank has ended its aggressive interest rate hiking cycle after leaving rates unchanged in the meeting after ten straight rate hikes.
Comments from policymakers following the meeting have been mixed with ECB president Christine Lagarde’s warning against declaring victory early in the fight against inflation.
The pound is pushing higher after stronger-than-expected business activity data, which saw the service sector return to expansion in November.
The services PMI rose to 50.5, which was up from 49.5 in October and ahead of forecasts of 49.5. The service sector is the dominant sector in the UK economy, accounting for over 70% of economic activity, so this figure is important.
Meanwhile, the manufacturing PMI also came in stronger than expected, 46.7, up from 44.8, suggesting that the sector contracted at a slower pace.
The composite PMI came in at 50.1, its highest level in four months and marginally above the 50 reading, which separates expansion from contraction. The data suggests that the UK economy has found its feet in November amid relief at the pause of interest rate hikes.
Today’s data came after the Chancellor’s budget yesterday where the pound struggled to gain traction after the OBR downwardly revised its growth forecasts and Jeremy Hunt’s budget underwhelmed.
