- Pound (GBP) rises after five days of losses
- UK services PMI was lifted to 51.3 from 50.5
- Euro (EUR) is falling despite business activity expanding
- ECB President Christine Lagarde sees inflation near 2%
The Pound-Euro (GBP/EUR) exchange rate is rising after four days of losses. The pair fell -0.12% in the previous session, settling on Tuesday at €1.1368. It traded between €1.1360 and €1.1390. At 14:00 UTC, GBP/EUR trades 0.45% at €1.1419.
The pound is rising after an upward revision to the November services PMI. The report, which gauges activity growth in the service sector, the dominant sector in the UK economy, was upwardly revised to 51.3 last month, up from 50.5 in the preliminary reading. However, this is still below October’s 52.3.
Uncertainty surrounding the budget announced by Finance Minister Rachel Reeves on November 26 prompted firms to delay new project investments, which in turn hit consumer and business confidence.
Delving deeper into the data, the figures showed that hiring continued to decline in November, falling at the fastest pace in nine months. Prices charged by firms in November were also at their weakest in four years.
The market is still pricing in around an 80% probability that the Bank of England will cut interest rates in the meeting this month.
The euro is under pressure despite encouraging data. The eurozone’s business activity expanded at the fastest pace in 30 months in November. Business activity as measured by the composite PMI rose to 52.8 in November, up from 52.5 in October, marking its sixth straight monthly increase.
A PMI reading above 50 indicates growth. The service sector PMI climbed to 53.6 last month, up from 53 in October, marking its highest level since May 2023.
The service sector in the eurozone is showing clear signs of recovery, and its strong performance is enough to offset any weakness in the manufacturing sector.
Separately, a speech by ECB President Christine Lagarde supported the view that the ECB would not cut interest rates again anytime soon. Consumer price growth is expected to remain close to 2% with underlying pressures consistent with achieving that level over the medium term.
