Pound gains on euro after mixed activity data, tumbles on yen
By Alun John
LONDON, July 24 (Reuters) -Sterling gained on the euro on Wednesday after a survey showed British business activity this month was stronger than in euro zone economies, while it held steady on the dollar and tumbled against a rebounding Japanese yen.
The euro was last down 0.1% on the pound at 84.04 pence EURGBP=D3 not far from its two year low of 83.84 pence hit earlier in July.
British business activity picked up this month, bolstered by the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023, PMI survey data showed Wednesday. In contrast, growth in euro zone business activity stalled.
"The divergence in economic fortunes is being reflected by currency markets so far this morning," said Nick Rees, FX Market analyst at Monex Europe.
The pound has been supported in recent months by better-than expected economic data, some stability from a new government, and also the Bank of England being slower to cut rates than some peers, including the European Central Bank, due to fears about sticky services inflation.
The BoE next meets in August, and markets see around a 45% chance of them cutting rates. Rees said Wednesday's data would do little to push the BoE towards or away from an August cut as it showed a mixed picture regarding the pass through from wages to inflation.
The pound was flat on the dollar at $1.29075. GBP=D3
Sterling's most dramatic move was against the Japanese yen, tumbling 0.55% to 199.67 yen, having been above 207 earlier this month. GBPJPY=
The yen has been strengthening broadly after likely official intervention to prop it up earlier in July, a rise in volatility causing traders to unwind yen-funded 'carry trades' that have hurt the currency, and a possibility of a rate increase from the Bank of Japan next week.
It could go further, and Nomura strategists, on Wednesday recommended a short GBP/JPY trade to clients, targeting 190.50 per pound by end-September.
Behind the idea, they said were: softening UK data, an under priced August BoE rate cut and BOJ July rate hike, shaky broad risk appetite and stretched long sterling positioning.
Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Reporting by Alun John, Editing by William Maclean
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