• PMI surveys for May were revised higher on both sides of the Channel but still point to slowing economic activity.
• Expectations for tighter monetary policy remain in place for both the ECB and the BoE.
• EUR/GBP trades around 0.8635 on Wednesday, showing little change throughout the day.

EUR/GBP trades around 0.8635 on Wednesday at the time of writing, with limited movement on the day as investors assess a fresh batch of revised macroeconomic data from the Eurozone and the United Kingdom (UK).

The currency pair remains broadly stable despite upward revisions to May Purchasing Managers Index (PMI) data in the Eurozone. The HCOB Services PMI was revised to 47.7 from an initial reading of 46.4, while the Composite PMI was lifted to 48.5 from the preliminary estimate of 47.5. The figure indicates a less severe contraction in private sector activity than previously estimated, although it confirms the fastest contraction since November 2024.

At the same time, inflation-related data continue to support expectations of a more restrictive monetary policy stance. Eurozone Producer Price Index (PPI) data showed prices rising 0.6% MoM in April after a 3.4% increase in March, exceeding market expectations. On an annual basis, producer prices accelerated by 4.9%, up from a revised 2% in the previous month. On Tuesday, the Eurozone core Harmonized Index of Consumer Prices (HICP) rose 2.5% YoY in May, up from 2.2% in April and above expectations of 2.4%.

Against this backdrop, several European Central Bank (ECB) policymakers have maintained a hawkish tone. ECB’s Olli Rehn stated that a June rate increase could be viewed as an insurance move against inflation risks, while ECB’s Gediminas Simkus stressed the need to act promptly to prevent price pressures from becoming entrenched. ECB’s Pierre Wunsch also argued that the case for tighter monetary policy remains intact.

In the United Kingdom, PMI data were also revised higher. The S&P Global UK Services PMI was revised up to 49.3 from a preliminary estimate of 47.9, while the Composite PMI improved to 49.7 from an initial reading of 48.5. Despite the upward revisions, both indicators remained below the 50 threshold, signaling the first contraction in business activity in more than a year.

Comments from Bank of England (BoE) officials have nevertheless provided support to the British Pound (GBP). BoE policymaker Megan Greene said she sees a growing case for further rate increases, adding that the speed of the response is just as important as its size. Earlier, BoE Governor Andrew Bailey reiterated the central bank’s commitment to bringing inflation back to its 2% target.

The balance between persistent hawkish expectations for both the European Central Bank and the Bank of England is limiting directional moves in EUR/GBP, leaving the pair confined to a narrow range.