Sterling gained against the euro following positive U.K. data on the UK services sector. The Services Purchasing Managers’ Index (PMI) compiled by Markit/CIPS in March increased to 55.3 from February’s 53.8. This is the highest level since January and beat expectations for an actual drop in the index to 53.5.
The U.K. services sector is a dominant sector, much more than construction and manufacturing, so the data was very encouraging. The British pound had already recently gained, and hit a 4-1/2 month against the dollar this week on string manufacturing PMI numbers.
EURGBP fell after the data to a two-week low of 0.8284 from a pre-data level of 0.8300.
The data is supportive of the pound because if businesses have a more optimistic outlook about the U.K economy in the months ahead, this raises the chances that the economic recovery is taking hold. In turn, this will help Britain avoid a recession and will lessen the chances of the Bank of England opting for further stimulus.