- Pound (GBP) is unchanged after losses last week
- UK PMIs were stronger than expected
- Euro (EUR) is unchanged after gains last week
- EZ Composite PMI was weaker than forecast
The Pound-Euro (GBP/EUR) exchange rate is unchanged after losses last week. The pair fell 0.6% in the previous week, settling on Friday at €1.1673. It traded between €1.1668 and €1.1770. At 11:30, GBP/EUR trades -0.02% at €1.1675.
The pound is unchanged as the market remains resilient despite the US becoming directly involved in the Israel-Iran conflict over the weekend. Instead, the market is waiting for Iran’s response. European stocks and US futures are broadly unchanged.
Meanwhile, the market is also digesting the latest business activity data. The UK composite PMI, which is considered a good gauge for business activity, rose to 50.7 in June, up from 50.3 in May and ahead of the 50.5 expected. The services PMI rose to 51.3, up from 50.9 and in line with forecasts. Meanwhile, the manufacturing PMI rose to 47.7, up from 46.4. The data highlights the resilience of the UK economy despite geopolitical tensions.
Meanwhile, the euro zone PMI data showed that business activity stalled in June, unchanged at 50.2, where the level 50 separates expansion from contraction. Economists had expected a rise to 50.5.
Delving deeper into the figures, the services PMI was in line with forecasts at 50; however, manufacturing was weaker than expected, unchanged at 49.4, defying expectations of a rise to 49.8. Overall, the data suggests that the eurozone region is struggling to gain momentum as both manufacturing and services show just marginal progress.
When broken down into regions, Germany showed some signs of modest improvement; however, France continues to act as a drag.
For the ECB, service inflation remains slightly sticky due to input costs, although this is balanced by disinflation in goods and the impact of a stronger euro.
Energy prices are rebounding due to Middle East tensions, and if they continue to rise, this could become a concern.
