- Pound (GBP) is flat after gains yesterday
- UK services PMI expands at the slowest pace this year.
- Euro (EUR) is unchanged as services PMI eases
- Input & output costs fall
The Pound Euro (GBP/EUR) exchange rate is falling after gains in the previous session. The pair rose 0.24% in the previous day, settling on Tuesday at €1.1802 and trading in a range between €1.1768 and €1.1814. At 11:00 UTC, GBP/EUR trades -0.05% at €1.1799.
The pound is trading unchanged as investors digest the latest UK data and on the eve of the UK General election. Data showed the services PMI fell to 52.1 in June, down from 52.9 in May and an upward revision from the preliminary estimate of 51.2.
This was the eighth straight month the service sector expanded, albeit at the slowest pace this year.
Delving deeper into the data, new business orders rose at a subdued pace compared to historical standards, with firms noting increased client nervousness and delays to approve ahead of July’s general election.
Tomorrow, the UK population will head to the polls to vote for the next government. The Labour Party is expected to win with a comfortable Majority. The New Labour government is unlikely to dramatically change the UK fiscal position. The optimism of stability could offer some support to the pound; however, this may be quickly overshadowed by the Bank of England rate cut expectations.
The market is currently pricing in a 60% probability of a rate cut in August.
The euro is unchanged after data showed that growth in the eurozone slowed in June as a resurgent services sector failed to offset the slump in manufacturing.
The services PMI index was revised higher to 52.8, up from the preliminary reading of 52.6, although this was down from May’s 53.2.
The composite PMI index was 50.9, above the 50 level that separates expansion from contraction but down from May’s 52.2.
While demand softened for the first time since February, input costs and output costs also cooled. This bodes well for inflation to continue cooling.
