- EUR/GBP moves little as HCOB Eurozone Services PMI fell to 49.7, though it remains above the expected 48.9 reading.
- Germany Composite PMI edged lower to 48.5 in May, slightly below the expected 48.6.
- BoE Governor Andrew Bailey said that monetary policy is likely to ease, though he cautioned that the outlook remains uncertain.
EUR/GBP moves little after registering losses in the previous session, trading around 0.8420 during the European hours on Wednesday. The currency cross remains steady after the Purchasing Managers’ Index (PMI) data was released from the Eurozone and Germany.
HCOB Eurozone Composite PMI came in at 50.2 in May, slightly lower than the previous 50.4 reading but above the expected 49.5. Meanwhile, Services PMI declined to 49.7 from the previous 50.1, though it remains above the expected 48.9 reading. Moreover, HCOB Germany Composite PMI declined to 48.5 in May, slightly below the expected 48.6 and April’s 50.1 reading. Meanwhile, German Services PMI fell to 47.1 from 49.0 prior.
Data showed on Tuesday that the Eurozone Harmonized Index of Consumer Prices (HICP) fell by 1.9% year-over-year in May, below the European Central Bank’s (ECB) 2% target for the first time in eight months. The softer inflation data reinforced expectations that the central bank might cut rates on Thursday. Financial markets had fully priced in the odds of the ECB reducing its Deposit Facility Rate by 25 basis points (bps) to 2% from 2.25% in June.
The Bank of England (BoE) officials appeared on Tuesday to testify before the Parliament’s Treasury Committee on inflation and the economic outlook. BoE Governor Andrew Bailey reiterated that monetary policy is likely to loosen; however, he highlighted that the path ahead is increasingly uncertain. Rising global trade tensions could potentially dampen investment and economic growth in the United Kingdom (UK), Bailey noted.
The BoE Monetary Policy Report Hearings also indicated that there is no clear consensus on how quickly the interest rates will go lower. Some policymakers are concerned that inflation may persist, while other board members believe that keeping rates too high for too long could harm the economy. The central bank in the UK is likely to gauge economic data to make the final policy decision.
