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LONDON – The British pound traded just off the 2.5-month highs reached against the euro earlier on Wednesday, as eurozone surveys of purchasing managers outperformed Britain’s, while the British currency gained for a third session against the dollar.

The pound’s recent moves have been driven by the dollar, with investors taking into account an earlier-than-expected cut in asset purchases by the Federal Reserve after the US central bank last week signaled higher rates in 2023. But Wednesday’s PMIs put the focus back squarely on data.

Inflationary pressures facing UK businesses reached record highs this month, and private sector growth slowed only slightly from an all-time high in May when restrictions on coronaviruses were lifted, a revealed an investigation Wednesday.

Preliminary reading of the IHS Markit / CIPS UK Composite Purchasing Managers’ Index (PMI) highlighted one of the biggest monthly improvements in trading activity since 1998, with a reading of 61.7 – not far away from May’s unprecedented 62.9.

The services sector PMI fell to 61.7 in June from 62.9 in May. The small manufacturing index fell to 64.2 from 65.6.

Meanwhile, Eurozone business growth accelerated to its fastest pace in 15 years this month, as the easing of more foreclosures and the unleashing of pent-up demand resulted in a boom in the bloc’s dominant service industry, according to a survey.


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The pound lost some of its morning gains against the euro after the data. At 12:33 GMT, the pound was up 0.2% against the euro at 85.41, after hitting 85.30 pence – its highest since April 6 – earlier in the session.

Against the dollar, the British pound was up 0.3% to $ 1.3989, up for a third consecutive session.

“Stronger PMI responses in the euro area and a weaker UK survey may have contributed to the weakening of the pound against the euro as the data was released this morning,” said Oliver Blackbourn, manager portfolio at Janus Henderson.

“However, the data is unlikely to change the situation for the Bank of England tomorrow,” he said, referring to a meeting of the bank’s monetary policy committee on Thursday.

Top UK central bank officials still appear divided over whether to end their £ 875bn ($ 1.2 trillion) government bond buying program, after inflation hit its highest level in almost two years.

Elsewhere, on the fifth anniversary of the Brexit referendum, EU member states have informally agreed to grant Britain a three-month extension for one of the contentious aspects of the protocol post-Brexit in Northern Ireland, Irish national broadcaster RTE reported.

Last week, London asked Brussels for an extension to allow time to resolve a dispute over whether it could continue to sell chilled meat products such as sausages, produced in mainland Britain, in Northern Ireland under British rule.


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The protocol essentially keeps Northern Ireland in the EU’s customs union and adheres to many of its single market rules to avoid creating trade barriers with EU member Ireland, thus putting jeopardize the 1998 Good Friday Peace Agreement.

Meanwhile, Britain has delayed the final phase of reopening its economy by a month until July 19, in an attempt to use the extra time to speed up the country’s vaccination program.

The British pound has been one of the best performing ‘G10’ currencies this year on bets the UK economy will reopen faster than its peers due to its rapid progress with the COVID-19 vaccination program. Around 80% of the UK adult population has now received a first dose.

CFTC data shows speculators are maintaining a net long position in the currency. (Reporting by Ritvik Carvalho; Editing by Ana Nicolaci da Costa and Gareth Jones)


In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.


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