- Pound (GBP) rises after losses last week
- Data last week saw investors reassess the BoE’s next move
- Euro (EUR) slips ahead of PMI data
- ECB rate decision is due later in the week
The Pound Euro (GBP/EUR) exchange rate is rising at the start of the week after booking losses in the previous week. The pair fell -0.83% last week, settling on Friday at €1.1555 and trading in a range between €1.1490 – €1.1669. At 07:35 UTC, GBP/EUR trades +0.14% at €1.1569.
The pound came under pressure last week as investors digested data showing that the UK inflation cooled by more than expected in June. The consumer price index fell to 7.9% year on year, down from 8.7% in May. This, along with a decline in core inflation and services inflation, fueled bets that the Bank of England could raise interest rates by 25 basis points next week rather than 50 basis points.
On Friday, retail sales data showed that UK consumers continued to spend in June thanks to the hot weather. Retail sales jumped 0.7% up from 0.3% month on month in May. However, with consumer confidence falling, strong retail sales could soon evaporate.
Attention today is on the S&P Global manufacturing, services and composite PMI data, which should provide further clues over how well the UK economy is holding up.
The composite PMI which is often considered a good gauge for business activity is expected 2 slow to 52.4 in July, down from 52.8 the level 50 separates expansion from contraction.
The euro will also be looking toward PMI data today. The service sector is expected to grow at a slower pace of 51.5, down from 52. Meanwhile, the manufacturing sector is expected to contract with the PMI at 43.5 just up slightly from 43.4 in June. Meanwhile, the composite PMI, which tipped into contraction in June, is expected to contract further in July at 49.7.
In addition to the detail, investors will be digesting the results from the Spanish election over the weekend, which points to further gridlock in the Iberian peninsula.
