Pound to Euro Rate Boosted by UK PMI Surprise and Consumer Confidence Improvement
PoundSterlingLIVE – The rose against the Euro ahead of the weekend after UK survey data pointed to a more upbeat picture of the economy in December, while a similar survey of the Eurozone warned of economic contraction.
The S&P PMI survey showed the services sector saw activity increase in December as it built on November’s improvement, raising the odds that a recession will be avoided.
The read at 52.7, well above November’s 50.9 and the expectation for 51.
The , which assesses the broader economy, read at 51.7, suggesting the economy is comfortably in expansionary territory.
The market was expecting 50.9, a shave higher than November’s 50.7.
These data contrast with the Eurozone’s composite figure – released half an hour earlier – of 47, which points to contraction.
The contrasting fortunes create a clear gulf between the UK and Eurozone economies that supports the Pound to Euro exchange rate, which has jumped a third of a per cent to 1.1650.
The Pound to Dollar exchange rate is flat at 1.2760, which is probably understandable following a 1.60% gain over the past two days alone.
S&P Global says business activity was supported by a renewed improvement in order books, alongside efforts to work through post-pandemic backlogs.
The survey meanwhile confirms the Bank of England is right to be worried about persistent inflationary pressures in the services industry.
S&P Global reports input cost inflation increased to its highest since August, driven by another sharp rise in operating expenses at service sector companies. This was widely linked to rising salary payments.
The Bank of England kept interest rates unchanged on Thursday and warned rates could rise again owing to fears of ongoing inflation pressures linked to wages, particularly in services.
The Pound rose in response to this message, and Friday’s findings from the PMI survey give the Bank’s stance added credibility.
December data also indicated that UK private sector firms are optimistic overall about their own growth prospects for 2024.
It’s not just businesses that are increasingly optimistic about the next year; consumers are also more chipper.
The recovery in consumer confidence extended into December, according to a much-watched survey.
GfK’s composite index of consumers’ confidence rose to -22 in December, from -24 in November, which was a marked improvement on October’s reading and suggests a trend is establishing.
This brings the headline figure close to a two-year high (-21).
“The ongoing recovery in consumers’ confidence adds weight to our view that households’ spending will partially rebound in Q4, supported by an increase in real wages,” says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics.
An original version of this article can be viewed at Pound Sterling Live
