- Pound (GBP) is holding steady after small gains last week
- UK manufacturing PMI rose to 51.2
- Euro (EUR) digests an improving manufacturing picture
- ECB is still expected to cut rates on Thursday
The Pound Euro (GBP/EUR) exchange rate is holding steady after modest gains last week. The pair rose 0.08% in the previous week, settling on Friday at €1.1746 and trading in a range between €1.1707 and €1.17689. At 12:00 UTC, GBP/EUR trades -0.02% at €1.1743.
The pound is holding steady at the start of the week, after modest gains from the previous week after a downward revision to UK manufacturing activity.
According to the S&P Global Manufacturing Purchasing Managers Index, manufacturing activity rose to 51.2 in May, up from 49.1 in April. This was down slightly from 51.3 in the preliminary reading.
However, it still marks a surge across the 50 level, which separates expansion from contraction, as the UK manufacturing sector returned to form last month.
This was the second time in the past two years that manufacturing activity expanded. Delving deeper into the figures, output and new orders grew at the fastest pace since 2022, boosted by strong domestic and international demand and improving international conditions.
Meanwhile, the euro weighs data that showed manufacturing activity contracted at a slower pace in May.
The S&P Global manufacturing PMI rose to 47.3, up from 45.7. However, this was also a downward revision from 47.4 in the preliminary reading. Still, it marks the highest level in 14 months, and it is a sign that the downturn in the manufacturing sector is starting to ease.
The data showed that the manufacturing picture improved across all countries in the region, with Spain and the Netherlands experiencing acceleration.
The data comes ahead of the European Central Bank’s interest rate decision on Thursday. The central bank is widely expected to cut interest rates by 25 basis points from the record 4% level two 3.75%.
The rate decision comes after Friday’s inflation data, which show that consumer prices rose 2.6% year over year in May, up from 2.4% in April. The rise in inflation, coupled with eurozone unemployment being at a record low and negotiated wage growth by more than expected, raises questions about how aggressively the ECB can cut rates across the remainder of the year.