- Pound (GBP) rises for a second day
- UK consumer confidence falls to -21
- Euro (EUR) steady despite concerns over the German economy
- German IFO Business Climate due
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.15% in the previous session, settling on Thursday at €1.1692 and trading in a range between €1.1659 – €1.1703. At 11:00 UTC, GBP/EUR trades +0.10% at €1.1704.
The pound is pushing high on expectations that the UK has already left the recession despite weaker-than-expected consumer confidence data.
UK consumer morale unexpectedly declined in February, according to the GfK consumer confidence index. Consumer morale dropped by two points to -21 in February, down from -19 and defying expectations of a slight rise to -18. This marks the first decline in consumer sentiment in four months and comes amid concerns of persistent inflation.
The survey results came after UK PMI data yesterday, which showed that the UK is likely already out of the recession it tipped into at the end of 2023, thanks to solid service sector activity and high business optimism.
The service sector PMI remained steady at 54.3 in February, an 8-month high, whilst the composite PMI, a good business gauge for business activity, rose to a nine-month high of 53.3.
However, service sector inflation and strong wage growth in service firms are things the Bank of England is likely to keep an eye on and could prevent the central bank from cutting interest rates sooner rather than later.
Meanwhile, the euro was holding steady despite some concerns over the German economy. Data showed that the economy contracted 0.3% quarter on quarter in the final three months of 2023.
The data comes after PMI data yesterday showed that the factory downturn deepened in the eurozone’s largest economy. The manufacturing PMI tumbled to 42.3 from 45.5 in January, amid falling demand at home and abroad.
Attention will now turn to German Ifo business climate data, which is expected to be modestly higher, to 85.5 from 85.2. Such a small tech hire is unlikely to influence the euro. It would take a substantial beat or miss for the euro to respond.
