GBP/EUR Exchange Rate on Strong Footing as UK Service Sector Activity Picks Up
The Pound Euro (GBP/EUR) exchange rate is edging higher this morning as markets reacted to the release of the UK’s latest service sector survey.
At the time of writing the GBP/EUR exchange rate has appreciated around 0.2% so far today, with the pairing striking a new one-week high.
Pound (GBP) Exchange Rate Jumps as UK Services PMI Strikes an Eight-Month High
The Pound Sterling (GBP) exchange rate was lifted this morning, with GBP investors welcoming the release of the UK’s latest Services PMI.
According to data published by IHS Markit, the UK’s services index, jumped from 54.0 to 55.1 in June, easily besting forecasts it would remain flat and striking an eight-month high.
The sharp rise in activity, was largely attributed to an upturn in client demand through the business and financial sector as well as the glorious weather helping to boost consumer spending.
With the rapid expansion of the services sector last month allowing the UK’s private sector to close the second quarter on a high note, analysts suggest that this should help to improve the chances of the Bank of England (BoE) targeting a rate hike later in the summer.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘Stronger growth of service sector activity adds to signs that the economy rebounded in the second quarter and opens the door for an August rate hike, especially when viewed alongside the news that inflationary pressures spiked higher.’
Eurozone Services PMI Fails to Provide Equal Support for the Euro (EUR) Exchange Rate
Meanwhile the Eurozone published its own services PMI this morning, with the Euro (EUR) unable to find similar support enjoyed by the Pound (GBP) despite a better-than-expected result.
This came as the report revealed the outlook from firms was at its gloomiest since late 2016, with businesses becoming increasingly nervous in the face of growing trade war fears.
Williamson, said:
‘The upturn in the pace of economic growth and resurgent price pressures adds support to the ECB’s view that stimulus should be tapered later this year, but the details of the survey also justify the central bank’s cautious approach to policy
In particular, a weakening in business optimism to the lowest for over 1-1/2 years reflects intensifying nervousness about the outlook for the economy, notably in manufacturing, as trade-war talk escalates.’
GBP/EUR Exchange Rate Forecast: Rebound in German Factory Orders to Bolster EUR?
Looking ahead, the Pound Euro (GBP/EUR) exchange rate may fall back on early on Thursday morning following the release of Germany’s latest Factory Order figures.
Economists forecast that May’s data will see order growth rally sharply in May, with expectations they will rebound from -2.5% to 1.1% and likely lending support to the Euro (EUR).
Meanwhile GBP investors will be focused on a speech by the Bank of England’s Mark Carney later in the session, with the BoE Governor potentially bolstering Sterling sentiment should he appear optimistic towards the chances of a rate hike later in the summer.