- Pound (GBP) is rising after 3 days of losses
- UK services PMI rebounded to 50.2
- Euro (EUR) falls amid concerns over growth
- The composite PMI fell below 50
The Pound-Euro (GBP/EUR) exchange rate is rising after three days of losses. The pair fell by -0.24% in the previous session, settling on Tuesday at €1.1843. It traded between €1.1814 and €1.1875. At 10:30, GBP/EUR trades -0.22% at €1.1840.
The pound is rising after UK business activity painted a mixed picture. UK service sector PMI rose by more than expected to 50.2, up from 49 in April and ahead of the 50 level expected. However, the manufacturing sector activity contracted at a faster pace with the PMI in May falling to 45.1, down from 45.4 in April and below the 46 that economists had forecast. The composite PMI, which is considered a good gauge for business activity, showed a contraction of 49.4; however, this was up slightly from 48.5 in April.
However, the data shows that the private sector shrank again this month as Donald Trump’s tariffs hit demand from abroad, revealing a darkening outlook for UK businesses.
The UK government’s trade deal with the US may help soften the trade blow as business sentiment is at the highest level in five months.
The euro is falling after PMI data showed that business activity in the bloc unexpectedly fell back into contraction in May.
The closely watched PMI figures fell to 49.5 in May, down from April’s 50.4. This fell below the 50 level separating growth from contraction and came in short of the 50.7 that economists had forecast.
Delving deeper into the figures, the service sector, which has been a driver of growth in recent years, was the main reason for the decline. The services PMI files are 48.9 down from 50.1 in April.
The data suggests that Trump’s trade war weighing on the eurozone economy, but most likely through the uncertainty its generating rather than due to direct trade effects so far.
