The GBPEUR exchange rate was higher by 0.10% after PMI figures in the UK were revised higher, while they went the other way in Europe. That helped traders to ignore a slight improvement in Eurozone retail sales.
The GBP to EUR trades around 1.1735 ahead of today’s Bank of England interest rate announcement.
UK PMI data revised higher for July
UK services sector activity expanded more than forecast in July, according to a final report from IHS Markit today.
The IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised higher to 59.6 in July versus 57.8 in the flash reading.
Tim Moore, Economics Director at IHS Markit, said:
“July data illustrates that recovery speed across the UK economy has slowed in comparison to the second quarter of 2021. More businesses are experiencing growth constraints from supply shortages of labor and materials, while on the demand side we’ve already seen the peak phase of pent-up consumer spending.
He added: “The full easing of pandemic restrictions appears to have helped limit the overall loss of momentum towards the end of July.”
Eurozone retail sales were also higher, rising close to expectations in June. The 5% number was better than the 4.5% expected, but that was lower than the 8.6% seen in May when consumers rushed back to stores. The monthly increase was not the same across the board. Sales rose fastest in Ireland, Germany and Latvia, which was in part due to the lifting of lockdowns were lifted.
Bank of England ahead for the British pound
Today sees the latest Bank of England interest meeting and that will drive the GBP v EUR for the rest of the week. The bank will undoubtedly keep interest rates steady at the record low of 0.1%, but traders are hoping for clues on the next policy changes.
ING bank said: “We expect the Bank of England to strike a cautiously optimistic note on Thursday (5 August) – though crucially we’re unlikely to get any fresh hints on the possible timing of future hikes. Nor are we likely to see an early end to the Bank’s QE programme – something BoE hawk Michael Saunders has recently advocated.”
The bank also expects a lower growth forecast in Q3, saying: “The Delta variant has clouded the near-term outlook. We’d expect the Bank to pare back its forecast for third quarter growth from 3.8% to something more like 1.5-2%.”