- Pound (GBP) is falling after gains yesterday
- UK services PMI returned to growth in May
- Euro (EUR) rises even as business activity remains stagnant
- The ECB will likely cut rates on Thursday
The Pound-Euro (GBP/EUR) exchange rate is falling after yesterday’s gains. The pair rose by 0.42% in the previous session, settling on Tuesday at €1.1886. It traded between €1.1830 and €1.1894. At 17:30, GBP/EUR trades -0.14% at €1.1872.
The pound is edging no despite data showing that the UK service sector returned to growth in May. UK business optimism rebounded to its highest level in October following a deal between the US and the UK to ease trade tensions.
The UK composite PMI, which is considered a good gauge for business activity, rose to 50.3 in May, up from 48.5 in April and significantly higher than the preliminary reading of 49.4.
The rollback of US tariffs, the recovery in the financial markets, and the stronger PMIs suggest that the economy could be starting to recover in May.
This week, President Trump spared the UK from doubling tariffs on steel and aluminium imported into the US. The Prime Minister set a five-week deadline for his government a 5-week deadline to finalise the details of a trade agreement announced last month.
The euro is rising despite business activity in the eurozone stagnating in May. The eurozone composite PMI came in at 50.2, as activity in the service sector contracted for the first time since November amid falling demand.
The service sector’s activity dropped to 49.7 in May, down from 50.1 in April, signalling a marginal contraction below the 50 level that separates expansion from contraction.
The data showed that price pressures eased across the board, with composite input costs rising at the slowest pace in six months and selling pressures rising at the weakest rate since October.
The data comes ahead of tomorrow’s ECB rate decision, where the central bank is expected to cut rates by 25 basis points.