Euro to British Pound (EUR/GBP) Exchange Rate Reacts before ECB Announcement
Ahead of the Bank of England and European Central Bank rate decisions, a veritable stream of European economic data saw the Euro to British Pound exchange rate fluctuate.
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The Euro advanced on its British rival before a downward correction saw it trending in a narrow range, moving from a high of 0.8150 to a low of 0.8127.
Over the course of local trading movement in the Euro to Pound exchange rate was inspired by services PMI reports for the UK, Eurozone, Germany and France.
The UK’s service report showed a slight moderation in growth, although the PMI failed to decline by as much as expected and still indicated that the UK’s service sector is expanding strongly.
David Noble, of the Chartered Institute of Purchasing and Supply, said of the report; ‘Firms in the services sector are creating jobs at a level seen only since 1997 and offering bigger salaries to boot; a sign of ever-increasing confidence in the sector, which is enabling firms to support expansion and take advantage of improved economic conditions. This bullishness is built on a foundation of solid rises in business activity and new work.’
Sterling had come under pressure earlier in the session as the British Retail Consortium’s measure of shop prices declined by more-than-anticipated.
However, as the day progressed Sterling recouped its small and short-lived losses against the Euro.
Yesterday the common currency put on a comparatively impressive performance as investors bet that any ECB policy adjustments have been priced into the market and the Euro didn’t decline after Eurozone inflation was shown to have slowed by more than forecast.
Today’s data for the region revealed that French services and composite PMI slipped into contraction territory in May.
It was the first time in three months that service sector activity had fallen and saw Markit economist Jack Kennedy state; ‘The French service sector disappointingly sank back into contraction territory during May […] competitive pressures necessitated a sharper cut in output prices despite faster input cost inflation, putting pressure on companies operating margins. After GDP stagnated in Q1, there seems to be little evidence of the French economy turning the corner so far in the second quarter.’
Measures of the Eurozone and German services/composite PMI declined modestly in May, but still held above 50.
Meanwhile, final first quarter growth data for the Eurozone confirmed expansion of 0.2 per cent.
This was slightly softer than the revised growth of 0.3 per cent recorded in the final three months of 2013 but was the result economists had anticipated.
On the year the Eurozone’s economy expanded by 0.9 per cent in the first quarter.
Government expenditure in the region came in at 0.3 per cent rather than 0.2 per cent and household consumption printed at 0.1 per cent, as expected.
Separate reports detailed a 0.1 per cent month-on-month decline in the Eurozone’s producer price index in April.
Producer prices were down by 1.2 per cent on the year.
EUR/GBP movement is likely to be restrained before the BoE and ECB deliver their rate decisions. If the BoE leaves policy unaltered (as forecast) and the ECB introduces unexpected stimulus measures the EUR/GBP exchange rate may tumble on Thursday.
Currently the Euro is trading against the British Pound in the region of 0.8136 and is trading against the US Dollar in the region of 1.3612.