- Pound (GBP) is falling for a second day
- UK services PMI data is due to ease to 51.2
- Euro (EUR) rises but trade worries could limit gains
- Eurozone composite PMI is expected to show 51.4
The Pound Euro (GBP/EUR) exchange rate is falling for a second straight session. The pair fell 0.12% in the previous session, settling on Tuesday at €1.2021. It traded in a range between €1.1999 and €1.2055. At 09:00 UTC GBP/EUR trades -0.03% lower at €1.2019.
The pound is inching lower against the euro but rising against the US dollar ahead of UK business activity data today and tomorrow’s Bank of England interest rate decision.
The UK services PMI is expected to show that activity in the UK’s dominant sector is 251.2 in January down modestly from 51.5 in December. Service sector activity and weaker input costs could see the market raise rate cut expectations, pulling GBP lower; Sticky service sector inflation has been an obstacle for the BoE to cut rates. However, recently there have been signs that service sector inflation is easing.
The data comes ahead of tomorrow’s Bank of England interest rate decision. The central bank is expected to cut interest rates by 25 basis points to 4.5% from 4.75%. This would mark the third interest rate cut from the central bank this easing cycle.
Given the expected rate cut, attention will be on guidance for further rate cuts this year.
The euro has crawled higher, but gains could be limited amid ongoing concerns regarding trade tariffs.
At the weekend, President Trump warned that the European Union would be next in line for trade tariffs given its large trade surplus with the US.
Attention is also on eurozone PMI data and PPI wholesale inflation figures.
PPI is expected to rise 0.4% month on month in December, down from a hefty 1.6% gain in the previous month.
Meanwhile, the composite PMI, considered a good gauge of business activity, is expected to be 50.4, recovering into expansion after a contraction in December.
The data comes after the ECB cut interest rates by 25 basis points last week and signaled further rate cuts ahead.
