- Pound (GBP) is rising after 5 days of gains
- PM Starmer backed Chancellor Rachel Reeves
- Euro (EUR) is falling against the pound and the USD
- Eurozone PMI data was revised higher but growth remains weak
The Pound-Euro (GBP/EUR) exchange rate is rising, snapping a five-day losing run. The pair fell 0.64% in the previous session, settling on Wednesday at €1.1569. It traded between €1.1532 and €1.1660. At 15:30, GBP/EUR trades 0.37% at €1.1611.
The pound is rebounding on Thursday after Kier Starmer expressed his support for Chancellor Rachel Reeves, quashing speculation that her tenure as Chancellor was limited, and as the market digested stronger-than-expected business activity data.
UK service sector activity expanded at the fastest pace in almost a year in June. The services PMI rose to 52.8 last month, up from 50.9 in May, marking the highest level since August 2024. Meanwhile, prices charged rose at the slowest pace in almost four years, supporting the view that the Bank of England will cut interest rates again in August.
Elsewhere, the pound is finding support from the rise in the bond market after PM Starmer backed Chancellor Rachel Reeves and said he was committed to his government’s fiscal rules and to economic stability. Yesterday, the pound had fallen sharply along with gilts on worries that Rachel Reeves could soon be leaving her position, and a replacement may not be as committed to sticking to fiscal rules.
The euro is falling against the pound and the US dollar despite data showing that the eurozone service sector returned to modest growth in June
The services PMI rose to 50.5 in June, up from 49.7 in May, upwardly revised from the preliminary estimate of 50.
The composite PMI, considered a good gauge of business activity, edged up to 50.6 in June from 50.2, marking a three-month high but still indicating very modest growth. Meanwhile, new business orders declined for the 13th straight month, but the contraction did ease.
Import price inflation in the service sector has reached a 7-month low but remains relatively high compared to historical standards.
The data comes as the ECB is expected to leave interest rates unchanged in the July meeting, it could cut rates once more in September.
