- Pound (GBP) rises for a third day
- Services PMI rose to 53.8 from 53.4
- Euro (EUR) falls after mixed PMI data
- EZ composite PMI rose to 47.9
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose +0.15% in the previous session, settling on Tuesday at €1.1686 and trading in a range between €1.1673 – €1.1703. At 09:00 UTC, GBP/EUR trades +0.18% at €1.1711.
The pound is charging higher after stronger-than-expected service sector activity in January. According to the latest data from S&P Global data, British services firms saw another pickup in growth, with the services PMI rising to 53.8, up from 53.4, and defying expectations of a fall to 53.2.
The strong performance of the dominant sector in the UK economy adds to signs of modest recovery, although factories are still being hit by the inflationary impact of the tensions in the Red Sea.
The manufacturing PMI contracted again in January at 47.3, although this was an improvement from 46.2 in December and was also ahead of the 46.7 that economists had penciled in.
As a result, the composite PMI, which is considered a good gauge for business activity, rose to 52.5 in January, a seven-month high up from December’s reading of 52.1.
The stronger growth in January could deter the Bank of England from cutting interest rates sooner rather than later, which is helping to lift the value of the pound.
The Bank of England will meet on February 1st to give its interest rate decision, and policymakers are expected to leave interest rates unchanged.
Meanwhile, the euro is falling after mixed PMI data.
On the one hand, the manufacturing activity in the eurozone contracted at a slower pace of 46.6 in January, up from 44.4 in December and ahead of forecasts of 44.8.
However, the services PMI contracted at a faster pace, with the PMI dropping to 48.4 from 48.8, defying expectations of a rise to 49.
Meanwhile, the composite PMI ticked higher thanks to the manufacturing input up to 47.9 from 47.6.
The data comes ahead of the ECB interest rate decision tomorrow, where the central bank is expected to leave interest rates on hold.