GBP/EUR: Euro turns to German GDP data

  • British Pound (GBP) Falls After Services PMI Beats Expectations
  • UK economy set to fall into recession later this year
  • Euro (EUR) rises on hawkish comments from Lagarde
  • German GDP and GFK consumer confidence pending

The Pound Euro exchange rate (GBP/EUR) is on the rise after heavy losses during the previous session. The pair settled down -0.85% on Tuesday to €1.1671 after trading in a range between €1.1643 and €1.1796. As of 05:45 UTC, GBP/EUR is trading +0.34% at €1.1711.

The pound tumbled on Tuesday after disappointing activity data. The closely watched S&P Global/CIPS manufacturing and flash services PMIs were released and revealed that the manufacturing PMI fell to 54.9 from 55.5 in April and below the forecast of 55.3.

Meanwhile, the services PMI dipped to 51.8 in May from 58.2 in April and well below the 55 expected. Data shows business activity is slowing significantly as rising prices hit services and supply chain disruptions hurt manufacturing.

The data adds to concerns that the UK economy could tip into recession later this year. The data will be a huge concern for the Bank of England, which must raise interest rates to rein in 40-year high inflation as the economy stagnates.

No high-impact UK data is due for release today.

The euro continued higher in the previous session after European Central Bank Governor Christine Lagarde made more hawkish comments. Lagarde said she would not rule out a 50 basis point rate hike if necessary.

His comments come after yesterday’s announcement that the ECB is likely to push interest rates out of negative territory by the end of September, with asset purchases expected to end early in the third quarter.

The hawkish comments overshadowed the weaker than expected PMI data. The composite PMI fell to 54.9, from 55.8 and below the forecast of 55.3.

Attention will now turn to German GDP data, which is expected to confirm quarter-on-quarter growth of 0.2% in the first three months of the year.

Meanwhile, German consumer confidence is expected to stabilize at -26 in June, up slightly from -26.5 in May.

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