- Pound (GBP) is rising after a flat day yesterday
- UK services PMI contracts in April
- Euro (EUR) falls modestly as PMI data shows growth slowed
- Germany’s Merz failed to secure enough votes for Chancellor
The Pound-Euro (GBP/EUR) exchange rate is rising after a flat session yesterday. The pair ended unchanged in the previous session, settling on Monday at €1.1750. It traded between €1.1716 and €1.1761. At 10:30 GBP/EUR trades +0.08% at €1.1758.
The pound is rising on Tuesday despite data highlighting weakness in the UK economy. The service sector, which accounts for over 80% of economic activity in the UK, shrank in April for the first time since October 2022 and at the fastest pace in over 2 years.
The S&P Global Services PMI index fell to 49.0 last month from March’s 52.5, although it was marginally ahead of the preliminary reading for April of 48.9.
Delving deeper into the figures, both new orders and employment fell sharply, while input cost pressures increased at the fastest pace since July 2023. The Bank of England is likely to take note of this ahead of Thursday’s rate decision, when the central bank is widely expected to cut rates by 25 basis points to 4.25%.
The euro is trading under pressure after Data showed that the eurozone economy grew at a softer pace in April. The eurozone services PMI signalled a new stagnation for activity, falling from 51 in March to 50.1 in April, which is just above the 50 threshold separating expansion from contraction.
The eurozone composite PMI index, which is considered a good gauge for business activity, was 50.4 in April, down from 50.9 in March amid softer demand conditions.
Meanwhile, news that Germany’s Friedrich Merz fell short of the necessary votes to secure the Chancellorship is also weighing on the mood modestly. Merz achieved 310 votes of the 316 needed. However, he is expected to win a second vote, which would explain the modest reaction.
Merz had planned to immediately begin tackling deep problems in Europe’s largest economy, which has suffered from stagnation for years.
