- Pound (GBP) is flat after the data drop
- Retail sales rise, services PMI eases
- Euro (EUR) is unchanged after PMI data
- Business activity slowed in May
The Pound Euro (GBP/EUR) exchange rate is unchanged on Friday after small losses yesterday. The pair fell 0.09% in the previous session, settling on Thursday at €1.1823 and trading in a range between €1.1859 and €1.1816. At 10:00 UTC, GBP/EUR trades 0.01% at €1.1823.
The pound is holding steady against the euro after mixed data as investors digested retail sales and the latest business activity data.
Data from the Office of National Statistics showed that retail sales jumped 2.9% month over month in May after falling an upwardly revised -1.8% in April. The data points to strong consumption as the UK weather warmed, but it also highlights the volatile nature of the data point.
Meanwhile, UK service sector activity eased in May, falling to 51.2 7-month low, defying expectations of a rise to 53.
The data comes after GDP figures showed the UK economy stalled in April at 0% and after the Bank of England left interest rates on hold at 5.25% but signals that they could cut rates in August.
Following yesterday’s Bank of England interest rate decision the market now prices in around a 50/50 probability of an August rate cut and is almost pricing in two rate cuts across 2024.
The euro is slipping lower after eurozone business activity data was weaker than expected, pointing to the economic recovery in the region slowing considerably. Manufacturing activity contracted at a faster pace, dropping to a six-month low of 45.6 from 47.3, and services sector activity grew at a slower pace, 52.6 from 53.2. As a result, the composite PMI, which is considered a good gauge for business activity, also fell more than expected to 50.8 from 52.2.
The slowdown in activity in the eurozone comes despite the ECB cutting interest rates by 25 basis points at the start of the month. The market is pricing in around three rate cuts by the central bank this year.
