European session review: GBP declines, despite better than expected PMI readings for UK

GBP fell against its major counterparts in the European session on Wednesday as better-than-expected flash manufacturing and services PMI readings from the UK were not enough to offset worries about a potential ban of the COVID-19 vaccine exports by the EU, which could slow the UK's vaccination program.

The flash survey data from IHS Markit and the Chartered Institute of Procurement & Supply (CIPS) revealed that the UK's manufacturing PMI improved to 57.9 this month from 55.1 in the previous month. The reading pointed to the strongest growth in the country's factory activity since November of 2017. Economists had forecast the index to climb to 55.0. According to the report, production growth reached its strongest since the end of 2020. New orders also rose at the fastest pace for three months, despite another relatively subdued rise in export sales. At the same time, Britain's services PMI surged to 56.8 in early March from 49.5 in February. The latest reading pointed to the first expansion in the services sector since October 2020. Economists had forecast the indicator to come in at 51.0.

In addition, market participants assessed the data from the Office for National Statistics (ONS), which showed that the UK's consumer price inflation slowed unexpectedly in February. According to the data, consumer price annual inflation decelerated to 0.4 percent y/y from 0.7 percent y/y in January. The rate was expected to increase to 0.8 percent y/y. Core inflation rate also slowed to 0.9 percent y/y from 1.4 percent y/y.