EUR/GBP pulls back to 0.8625 with the Pound trimming losses after Wednesday’s sell-off

The Pound pares some losses as UK Gilts rebound and UK Services activity beats estimations.
The Euro pulls back from highs despite better-than-expected HCOB Services PMI numbers.
On Wednesday, revived concerns about UK finances sent the Pound tumbling.

Guillermo Alcala FXStreet

The Euro is trading lower against the British Pound on Thursday, retreating from the 3 ½ month highs at 0.8670 hit on Wednesday as the uncertainty about Chancellor Rachel Reeves revived concerns about the UK’s fiscal health.

UK Prime Minister, Keir Starmer, was forced to show the Government’s support to Rachel Reeves on Wednesday, as her tearful image at the parliament, following diverse U-turns on welfare policies, opened a multi-billion hole in her team’s budget plans.

UK Gilts are showing a significant rebound on Thursday following Wednesday’s sell-off, which is providing some support to the British Pound.

In the macroeconomic front, the UK S&P Global Services PMI has been revised higher to 52.8, from the preliminary estimation of 51.3, which points to the strongest activity in almost a year.

These figures are contributing to improving confidence in the UK economy and have offset the impact of better-than-expected services activity figures in the Eurozone. The region’s services sector returned to growth in June, featuring a 50.5 reading in the HCOB Services PMI, following a 49,7 reading in May, and improving the 50.0 level previously estimated.

Economic Indicator

S&P Global Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in the UK’s services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Pound Sterling (GBP). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for GBP.

EUR/USD: Gains remain capped by 1.1650

EUR/USD remains in recovery-mode following the closing bell in Euroland on Wednesday, hovering around the 1.1650 zone amid renewed downside pressure on the US Dollar and a marginal improvement in the global sentiment.

GBP/USD appears bid around 1.3370

GBP/USD reverses part of its recent multi-day decline, gathering some balance and managing to reach the 1.3400 region, where some initial resistance seems to have turned up. Cable’s uptick comes in response to some loss of momentum in the Greenback despite the geopolitical scenario remaining fragile.

Gold struggles to surpass $5,200

Gold keeps its daily gains well in place, although a break above the $5,200 mark per troy ounce still remains elusive on Wednesday. The yellow metal’s rebound comes in response to the persistent flight-to-safety amid intense geopolitical tensions in the Middle East and the bearish performance of the US Dollar.