The pound-to-euro rate recorded its highest daily close since August 2022 yesterday, however, risk remains as the European Central Bank interest rate decision is just hours away.
The US dollar fell into negative territory yesterday against the euro and despite rebounding towards the end of the trading day, remains 0.75% lower on the week.
On the flip side, US PMI figures brought good news. The US services sector recorded the highest monthly growth in nine months, while the composite PMI rose sharply to 54.5 in May from 51.3 in April.
In May, private businesses in the US added 152,000 workers to their books, missing market forecasts of 175,000 by a long shot. This is the lowest amount of workers added in four months and could be fuelled by a loss of 20,000 workers in the manufacturing industry.
Yesterday, as expected, the Bank of Canada cut its key interest rate by 25 basis points in its June 2024 meeting. This shift in monetary policy signalled that more rate cuts would come should inflation continue to slow.
Following this announcement, the Canadian dollar fell to a one-month low against the US dollar.
This morning, markets heard German factory orders dropped by 0.2% in April 2024, missing forecasts of a 0.3% growth. This was largely due to falling orders in four sectors within the manufacturing sector, notably aircraft, ships and trains which dropped by 15.4% in April.
At 1:15pm (UK time) today, the European Central Bank will reveal its latest interest rate decision. Markets forecast the Bank to lower key interest rates by 25-basis points to 4.25%. Should policymakers choose to lower euro area interest rates, the ECB will be the first among key banks, the Bank of England and Federal Reserve, to resume its battle against high inflation.
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