- Pound (GBP) falls after a flat session yesterday
- UK services show a worrying trend in job cuts
- Euro (EUR) rises against the pound
- Eurozone inflation cools to 1.7%
The Pound-Euro (GBP/EUR) exchange rate is falling after a flat finish yesterday. The pair was flat at 0% in the previous session, settling on Tuesday at €1.1590. It traded between €1.1577 and €1.1603. At 22:30 UTC on Wednesday, GBP/EUR trades -0.22% higher at €1.1565.
The pound is falling as the broader market mood sours and following a downward revision to business activity in January.
The market mood deteriorated following the US stock market open amid a renewed sell-off in tech stocks, hurting risk sentiment and pushing riskier currencies, such as the pound versus the euro, lower.
Meanwhile, UK services PMI data was revised lower in January to 54, down from 54.1 in December and below the preliminary estimate of 54.3. However, more concerning was the fact that the UK service sector cut jobs last month as firms turned to automation rather than hiring new staff.
The data show that employment fell more sharply in January, continuing a trend that began in October 2024, marking the longest period of job shedding in the UK service sector in 16 years.
The data comes ahead of the BoE rate decision tomorrow, where the central bank is widely expected to keep rates unchanged.
The euro is rising against the pound but falling against the US dollar after inflation cools by more than expected.
Inflation eased to 1.7% year on year in January, down from 1.9% and below the 1.8% expected.
The move away from the ECB’s 2% inflation target came as EUR/USD rose to a four-year high late last month, adding to disinflationary pressures.
ECB will announce its first rate decision of the year tomorrow and is widely expected to leave interest rates unchanged at 2%. The ECB has noted that policy is in a good place. However, with inflation further from the 2% target, ECB doves may start getting louder which could pull the EUR lower.