- Pound (GBP) is supported by an upward revision to services PMI
- Services PMI rose to 53.4
- Euro (EUR) falls as a recession looks likely
- German inflation is due
The Pound Euro (GBP/EUR) exchange rate is holding steady after 2-days of gains. The pair rose +0.56% in the previous session, settling on Wednesday at €1.1593 and trading in a range between €1.1522 – €1.1608. At 09:00 UTC, GBP/EUR trades -0.01% at €1.1591.
The euro is holding steady against the pound and rising versus the USD after an upward revision to PMI data. The eurozone services PMI data showed an upward revision to the December reading to 48.8, up from the preliminary reading of 48.1 and up slightly from the November reading of 48.7.
Meanwhile, the composite PMI, which is considered a good gauge for business activity, was revised to 47.6 from the preliminary reading of 47. This was in line with November’s reading of 47.6.
While the figures were stronger than expected, the level 50 separates expansion from contraction, so the data shows that the region remains firmly in contraction and is, therefore, likely to be in recession in the final quarter of this year.
Attention will now turn to German inflation data, which economists expect to show that the consumer price index rose in December to 3.7% year on year, up from 3.2% in November. Hotter-than-expected inflation could fuel bets that the ECB will keep interest rates high for longer.
The market currently considers the ECB to be one of the first major banks to start cutting interest rates potentially. As soon as March
Meanwhile, UK PMI data showed that the service sector performed better than expected in December. The services PMI was 53.4 an upward revision to the preliminary reading of 52.7 and also a strong increase from November’s 50.9. This suggests that the UK economy is holding up better than expected.
Strong service sector activity would support the Bank of England’s more hawkish stance compared to other central banks. Bank of England Governor Andrew Bailey has been clear that the central bank is not considering cutting interest rates soon.
