The Euro remained broadly stable against the British Pound, trading around 0.8635 on Wednesday, as investors digested revised macroeconomic data from both the Eurozone and the United Kingdom. The Eurozone's HCOB Services PMI was revised upward to 47.7 from 46.4, and the Composite PMI to 48.5 from 47.5, indicating a less severe contraction in private sector activity, though still marking the fastest contraction since November 2024 [1][3]. Similarly, Germany's Composite PMI was revised to 48.8 from 48.6 [3]. Despite these upward revisions, both the Eurozone and UK PMIs remained below the 50 threshold, signaling ongoing contraction in business activity [1][3].
Inflation data in the Eurozone showed continued upward pressure, with the Producer Price Index (PPI) rising 0.6% month-on-month in April after a 3.4% increase in March, and accelerating to 4.9% year-on-year from a revised 2% previously. The core Harmonized Index of Consumer Prices (HICP) rose 2.5% year-on-year in May, up from 2.2% in April and above expectations of 2.4% [1]. Several European Central Bank (ECB) policymakers, including Olli Rehn, Gediminas Simkus, and Pierre Wunsch, maintained a hawkish tone, emphasizing the need for a restrictive monetary policy stance to counter inflation risks [1].
In the UK, the S&P Global Services PMI was revised up to 49.3 from 47.9, and the Composite PMI to 49.7 from 48.5, but both remained in contraction territory for the first time in over a year [1]. Bank of England (BoE) officials, notably Megan Greene, signaled a growing case for further rate hikes, with Greene potentially joining Chief Economist Huw Pill in voting for a 25bp hike at the next meeting on June 18. However, BoE Governor Andrew Bailey's comments suggest a June hike is unlikely, though a July hike remains a 50-50 prospect according to market pricing [2]. Elevated UK front-end yields and strong credit and mortgage data are seen as supportive for the Pound, though political and fiscal risks could limit gains [2].
On the currency markets, the Euro showed mixed performance, being the strongest against the New Zealand Dollar and the weakest against the Japanese Yen [1][3]. As of writing, EUR/USD traded 0.17% lower near 1.1610 [3].
Elsewhere, the Danish Krone hit a new historic low against the Euro at 7.4739, with the Danish central bank refraining from FX intervention in May. Danske Bank analysts suggest that continued upward pressure could prompt central bank action to cap EUR/DKK, though the likelihood of a unilateral 10bp rate hike in Denmark over the coming year is considered low [4]. The new Danish government has announced substantial future tax cuts, particularly on VAT for food, which are expected to lower inflation when implemented, but not before 2027. Previously announced cuts to food and fuel taxes have been cancelled, providing no additional inflation relief this year [4].
CONCLUSION
The Euro's stability against the Pound reflects a balance of upgraded but still contractionary PMI data and persistent hawkish signals from both the ECB and BoE. While inflation pressures and central bank rhetoric support a restrictive policy outlook, market reactions remain muted. The Danish Krone's record low against the Euro highlights ongoing FX pressures, though immediate central bank intervention appears unlikely.