gbp-british-pound-coin - GBP
  • Pound (GBP) rose yesterday after PM Johnson clings to power
  • UK composite PMI falls
  • Euro (EUR) rises as investor confidence improves
  • German factory orders fall again

The Pound Euro (GBP/EUR) exchange rate is edging lower on Tuesday after strong gains in the previous session. The pair settled +0.6% on Monday, at €1.1716 after trading in a range between €1.1642 – €1.1730. At 09:45 UTC, GBP/EUR trades -0.12% at €1.1700.

The pound pushed higher in the previous session after Prime Minister Boris Johnson won a vote of no confidence, albeit by a slim margin. The PM won by 211 votes to 148 late on Monday evening, which was enough to hang onto power, at least for now. However, the vote has shown that the discontent within the party was more widespread than initially expected. As a result, Boris Johnson is politically wounded and could struggle to re-unite his party.

Boris Johnson has a fight on his hands to win over senior allies and convince them that he is able to move forward from these questions over his leadership.

Oday the pound trades lower after data revealed that UKA businesses were feeling the strain amid rising inflation. Business activity, as measured by the composite PMI fell sharply in May to 53.1, down from 58.2, marking the lowest level since February. Although this was less severe than initially expected.

The Euro is on the rise today despite mixed data. On the one hand, German factory orders unexpectedly fell -2.7% month on month, when analysts had expected a rise of 0.4%. This was the third consecutive month when orders fell, as Chinese COVID lockdowns add to supply chain disruptions stemming from Ukraine war.

However, eurozone investor confidence improved by considerably more than expected, rising to -15.8, up from -22.6 which was the weakest figure since June 2020. This was an impressive improvement, although this could still deteriorate going forwards should interest rates start to rise in July.

The ECB interest rate decision is due on Thursday and could shed more light on when the central bank will start hiking interest rates.